A physician wants to borrow money for part ownership in a surgical clinic. He is not going to practice there. It is related to his primary occupation and he will receive a healthy income from the clinic. Is this a consumer of commercial loan?

I would classify this one as a business purpose loan.

Agreed. Commercial.

I think it would be a stretch to call it consumer.

If the physician was investing in a sandwhich shop, then I would tend more toward consumer than commercial - unless the physician was already an investor in sandwhich shops and derived significant income from the investments. This is where the line between consumer and business gets very fuzzy. Likewise if the physican quits his practice because he decides he would rather carve sandwhiches than people, then you have a business loan. Part of the difference is passive vs. active investments, and how much the activity relates to the borrowers current occupation.

But a physician investing in a surgical center? IMHO, that is a classic example of a business purpose loan.


BTW - the commentary for Reg Z, 226.3 (a) provides some excellent guidelines to follow:

2. Factors. In determining whether credit to finance an acquisition--such as securities, antiques, or art--is primarily for business or commercial purposes (as opposed to a consumer purpose), the following factors should be considered:

• The relationship of the borrower's primary occupation to the acquisition. The more closely related, the more likely it is to be business purpose.

• The degree to which the borrower will personally manage the acquisition. The more personal involvement there is, the more likely it is to be business purpose.

• The ratio of income from the acquisition to the total income of the borrower. The higher the ratio, the more likely it is to be business purpose.

• The size of the transaction. The larger the transaction, the more likely it is to be business purpose.

• The borrower's statement of purpose for the loan.
Examples of business-purpose credit include:

• A loan to expand a business, even if it is secured by the borrower's residence or personal property.

• A loan to improve a principal residence by putting in a business office.

• A business account used occasionally for consumer purposes.


Examples of consumer-purpose credit include:

• Credit extensions by a company to its employees or agents if the loans are used for personal purposes.

• A loan secured by a mechanic's tools to pay a child's tuition.

• A personal account used occasionally for business purposes.