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#2216780 - 07/01/19 03:18 PM Working Capital as a CD loan?
Lori01 Offline
100 Club
Joined: Jan 2007
Posts: 175
VT
We did a loan to a hotel in an LMI tract for several million dollars. Part of the money is being used to buy out a partner, part is being used to refi the current debt and part is being used for "working capital".
Sine the hotel is in an LMI tract, and employees LMI workers, I'm wondering if I can claim the part of the loan that is for working capital as a CD loan, since it is used to help stabilize the company, thereby benefiting the LMI tract and employees.

Or can I even claim the entire loan amount?

Thoughts?
Last edited by Lori01; 07/01/19 07:34 PM.
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#2217167 - 07/08/19 07:43 PM Re: Working Capital as a CD loan? Lori01
mrogersfib Offline
100 Club
Joined: Aug 2018
Posts: 116
I think it's important to start with the purpose of the loan here, and often I don't go for partner buyouts because they are only benefiting the owner of the company. Unless they specifically state in their application, or narrative that the additional intent is to hire more employees, or improve jobs for current employees. Otherwise, I don't think an examiner would necessarily allow themselves to draw between the lines with the scope of the purpose you provided.

Additionally, if the majority of the funds are going to be used to buy out the other partner(s) then the left over money wouldn't qualify because we can't take pro rata share of loans other than affordable housing loans. So what that tells us is that the majority of the loan has to benefit LMI people or geographies.

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