R337-4-6. Written Member Business Loan Policies

A credit union service organization offering member business loans shall adopt specific written loan policies and review them at least annually. The credit union service organization shall establish written credit policies, loan security requirements, loan investment, personnel, and collection policies. At a minimum, the policies shall address the following:

(1) the types of member business loans to be made;

(2) the qualification and experience of personnel (minimum of two (2) years) involved in making and administering member business loans;

(3) a requirement to analyze and document the ability of a borrower to repay the loan;

(4) receipt and periodic updating of financial statements and other documentation, including tax returns;

(5) a requirement for sufficient documentation supporting each request to extend credit, or increase an existing loan or line of credit (except where the credit union service organization finds that the documentation requirements are not generally available for a particular type of member business loan and states the reasons for those findings in the credit union's written policies). At a minimum, the documentation shall include the following:

(a) balance sheet;

(b) cash flow analysis;

(c) income statement;

(d) tax data;

(e) analysis of leveraging; and

(f) comparison with industry average or similar analysis;

(6) the collateral requirements shall include:

(a) loan-to-value ratios;

(b) determination of value;

(c) determination of ownership;

(d) steps to secure various types of collateral; and

(e) how often the credit union service organization will reevaluate the value and marketability of collateral;

(7) the interest rates and maturities of member business loans; and

(8) general loan procedures which include:

(a) loan monitoring;

(b) servicing and follow-up; and

(c) collection.