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#2264500 - 01/09/22 01:57 PM Reg B/ECOA commercial loan non-binding term sheet
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Kentucky
If a commercial borrower is given a non-binding term sheet, if the bank's approval is different than what is listed on the non-binding terms sheet, i.e., rate, term, collateral, amount, guarantor, etc., would this be considered a counteroffer per regulation B?

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#2264501 - 01/09/22 02:37 PM Re: Reg B/ECOA commercial loan non-binding term sheet Helpcompliance
rlcarey Online
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rlcarey
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Galveston, TX
What did they apply for? If they did not get approved for what they applied for, then it is a counteroffer. I have no idea what a non-binding term sheet might be and whatever it is, I hope your legal counsel has approved of its use.
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#2264504 - 01/09/22 10:22 PM Re: Reg B/ECOA commercial loan non-binding term sheet rlcarey
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Kentucky
rlcarey:
The purpose would be commercial, like buying a commercial investment property, refinancing existing business debt, purchasing inventory, working capital, etc.

If a commercial loan application does not detail the terms the borrower requested (very general application, like purpose, amount, and borrower name) if a non-binding terms sheet is given, would it be considered that is what the borrower applied for?

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#2264506 - 01/10/22 11:11 AM Re: Reg B/ECOA commercial loan non-binding term sheet Helpcompliance
rlcarey Online
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rlcarey
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Posts: 78,632
Galveston, TX
I was not questioning the use of the commercial loan funds - I was talking about how much credit they asked for. If your commercial application process is that wishy-washy - then that is the process on which you need to focus. You are asking about treating a symptom and not the disease.

If I approach the bank as a commercial loan applicant and I say I need a loan for working capital and I have no idea how much I need, then I personally would not touch this potential borrower until they figure that out. The same with borrowing to buy a piece of property or inventory or equipment. How can you be in and run a business if you cannot figure out how much credit you think you need and whether or not you think you can afford to borrow the capital?

Again, I have no idea what you mean by a non-binding term sheet as that is likely something that is specific to your own institution, and it not defined or even an industry standard. Whether or not this non-binding term sheet is some sort of an attempt to document an actual commercial application by your loan officers is going to be based on the facts that surround the development of this document. That is where I am suggesting that you start your analysis.
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The opinions expressed here should not be construed to be those of my employer: PPDocs.com

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#2264509 - 01/10/22 01:24 PM Re: Reg B/ECOA commercial loan non-binding term sheet rlcarey
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Kentucky
We are updating our application process to clarify; that is the reason for my question!

Thanks for your help, rlcarey!

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