Question

You are a banker reviewing the application for a loan for a commercial property for an investment group, but represented by a special entity named LTB in the promissory note.

Part 1:

• How would you proceed and why?
• What information would you need to obtain from the borrower and why this information is important?
• What are the implications for the investors? Explain.

Answer 1

Loans for commercial properties differ from personal properties as there will be more documentation and rules for commercial property loans. When the property is represented as LTB in a promissory note , it means it needs to be mentioned in the same manner in the loan document . This is because , a promissory note is a written document on payment of money or exchange of money and is a legal document which would make the property legally named as LTB. The respective document based on which it is mentioned as LTB must be submitted to the bank by the customer. We need to verify the documents carefully and the plan of the property for which the group applied for loan. Only after verifying these legal entities we need to proceed.

We need to obtain all the information regarding personal details of the borrowers under KYC norms as they help the bank in doing a background check on the customer before giving the loan. KYC has become an important rule in the banking industry for safety and security purposes. We also need to collect the legal document of the property and the name on which the land is registered and the connection between the borrowers and the land and it's owners if any. We need to examine if the borrowers have proper permissions for the said property .

The investors in this firm would be responsible for the loan taken as they need to provide their guarantee to the loan and also the rules states that all the investors would become co-owners and co-applicants for the loan and all are equally liable for the payment of the loan and the property .