Our institution does a lot of commercial loans in individual names. These loans are coded 4A for small business purposes and the individuals do have commercial, industrial, or professional purposes.

Our compliance team has come to a disagreement on how to determine the definition of loans for "investment purposes" and what needs to be changed to 9B2 or 6 and considered non-reportable.

One individual is arguing that if the small business is not the borrowers primary source of income then this loan would have to be considered a personal investment purpose and therefore non-reportable - is this the case??? We have never reported like this in the past and our auditors have never cited us for these loans.

An example would be a Doctor who has rental properties on the side and got a commercial LOC for the working capital of these rental properties. She argues that since these rental properties are not his primary source of income then this loan cannot be a small business!

I'd appreciate any insight.

Thanks!

I believe it all depends on how you report this loan on the call report.

I agree with WAB. I have a day job and I have a small business (sole prop) on the side doing photography - sports in particular. If I borrowed $18K for a new camera and lens, why would that not be a small business loan? It's greatly different than my banking day job, but it's a small business. The IRS sees it that way.