We have a car dealership who is located in a flood zone. Need to see if we are looking at this correctly. before we do these new loans.

Existing Loan A - $1,000,000 secured by real estate
Existing Loan B - $150,000 secured by real estate
New Loan C - LOC floor plan for new vehicles $500,000 max - secured by real estate and UCC contents
New Loan D - LOC floor plan for used vehicles $500,000 max - secured by real estate and UCC contents

Real estate has a value of $3,000,000
Contents are valued at $400,000

We currently have the max of $500,000 flood insurance for the real estate.

Would we also need $400,000 flood insurance for the contents?

First the building and contents have to be secured by the same loan.
Second, vehicles are not insurable contents.

Thanks for the reply,

The two new loans would be secured by both the building and the contents. The value on the contents does not include vehicles.

Then you are correct, $400,000 on contents if that is their insurable value.

Regarding the building and contents that have to be secured by the same loan, can you steer me to the citation so I can back it up.

Just so I am understanding your answer regarding the building and contents have to be secured by the same loan.
Lets say you originate a loan secured by commercial real estate in a flood zone and you have the required flood coverage, all is good. Later you originate another loan to same borrower secured by business assets, not the real estate.

Are you saying that since they are two different loans and neither loan is secured by the other loans collateral, the business asset loan is not required to have content coverage?

If the loan is secured by the business assets located within a building but is not secured by the building then the loan does not meet the definition of a designated loan.

See FDIC Rules & Regs 339.2 for the definition of a designated loan.

Thank you Dan. Always helpful.