We have a loan to a start-up LLC (#1) as the sole borrower; we also have 2 individuals as well as an LLC (#2) as guarantors.
The 2 individuals guaranteeing the loan are the sole members of #1, and are two of six members (all individuals) in entity #2.
When addressing affiliates, the below is given in the Getting It Right Guide to CRA, and it seems to address entities controlling entities, not individuals controlling entities when defining affiliates usable for Gross Annual Revenue purposes. We considered $2Mil in revenues on the loan to LLC #1, all of which came from LLC#2. I am uncertain whether they both would be considered under same control since there is no common ownership by the second entity/LLC. Your thoughts??
From the CRA guide:
Affiliate means any company that controls, is controlled by, or is under common control with another company. The term “control” has the meaning given to that term in 12 U.S.C. 1841(a)(2), and a company is under common control with another company if both companies are directly or indirectly controlled by the same company.
Generally, an institution should rely on the revenues that it considered in making its credit decision when indicating whether a small business or small farm borrower had gross annual revenues of $1 million or less. For example, in the case of affiliated businesses, such as a parent corporation and its subsidiary, if the institution considered the revenues of the entity’s parent or a subsidiary corporation of the parent as well, then the institution would aggregate the revenues of both corporations to determine whether the revenues are $1 million or less. Alternatively, if the institution considered the revenues of only the entity to which the loan is actually extended, the institution should rely solely upon whether gross annual revenues are above or below $1 million for that entity.