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Loan Memorandum

Loan Memorandum Template for United States

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Key Requirements PROMPT example:

Loan Memorandum

"Need to draft a Loan Memorandum for a $5 million commercial real estate loan to a medium-sized property development company, with particular emphasis on collateral analysis and environmental risk assessment, to be presented to the credit committee by March 2025."

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Document background
The Loan Memorandum is a critical document in U.S. lending operations that serves as the primary record of a proposed credit transaction. It is used when a lending institution needs to document and analyze a potential loan, whether for consumer, commercial, or institutional purposes. The document combines financial analysis, risk assessment, and regulatory compliance considerations into a single comprehensive record. A well-structured Loan Memorandum helps ensure compliance with federal and state lending regulations while providing a clear basis for credit decisions. It typically contains detailed information about the borrower's creditworthiness, proposed loan terms, collateral analysis, and risk mitigation strategies.
Suggested Sections

1. Executive Summary: Brief overview of the loan transaction and key terms

2. Borrower Information: Detailed information about the borrower, including financial status, creditworthiness, and business overview if applicable

3. Loan Terms: Comprehensive details of the loan including principal amount, interest rate, maturity date, payment schedule, and any special conditions

4. Use of Proceeds: Detailed explanation of how the loan proceeds will be used by the borrower

5. Security/Collateral: Description of assets securing the loan, including valuation and legal status

Optional Sections

1. Market Analysis: Overview of market conditions affecting the loan, typically included for commercial loans or when market conditions significantly impact the lending decision

2. Risk Assessment: Detailed analysis of credit, market, and operational risks associated with the loan, typically included for larger or more complex loans

3. Financial Projections: Future financial forecasts and cash flow analysis, particularly relevant for business loans or project financing

4. Regulatory Compliance: Analysis of compliance with relevant regulations and laws, included when dealing with regulated industries or complex regulatory requirements

Suggested Schedules

1. Financial Statements: Historical financial statements and related financial information of the borrower

2. Collateral Schedule: Detailed inventory and description of all assets securing the loan

3. Payment Schedule: Detailed amortization table or payment terms including dates, amounts, and allocation between principal and interest

4. Due Diligence Checklist: Comprehensive list of required documentation and verifications completed or pending

5. Credit Reports: Credit history, scores, and analysis of the borrower's creditworthiness

Authors

Alex Denne

Head of Growth (Open Source Law) @ Genie AI | 3 x UCL-Certified in Contract Law & Drafting | 4+ Years Managing 1M+ Legal Documents | Serial Founder & Legal AI Author

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alex.den.21@genieai.co
Relevant legal definitions
Advance
Applicable Interest Rate
Borrower
Business Day
Closing Date
Collateral
Commitment
Credit Facility
Default
Default Rate
EBITDA
Event of Default
Financial Covenants
Financial Statements
Fixed Charge Coverage Ratio
Governmental Authority
Guarantor
Indebtedness
Interest Payment Date
Interest Period
Lender
LIBOR
SOFR
Loan Documents
Material Adverse Effect
Maturity Date
Maximum Credit Amount
Obligations
Permitted Liens
Person
Prime Rate
Principal Amount
Related Parties
Security Agreement
Security Interest
Subsidiary
Tangible Net Worth
Total Leverage Ratio
UCC
Clauses
Loan Amount and Purpose
Interest Rate and Calculations
Repayment Terms
Conditions Precedent
Security and Collateral
Representations and Warranties
Financial Covenants
Affirmative Covenants
Negative Covenants
Events of Default
Remedies
Risk Assessment
Credit Analysis
Financial Information
Borrower Information
Market Analysis
Industry Analysis
Collateral Valuation
Exit Strategy
Regulatory Compliance
Credit Committee Approval Requirements
Due Diligence Requirements
Risk Rating
Pricing Analysis
Relationship History
Environmental Considerations
Legal Documentation Requirements
Industries

Truth in Lending Act (TILA) and Regulation Z: Federal law requiring disclosure of key terms and costs in consumer credit transactions, including interest rate disclosures

Equal Credit Opportunity Act (ECOA): Federal law prohibiting discrimination in lending and requiring fair lending practices

Fair Credit Reporting Act (FCRA): Federal law regulating the use of credit reports and credit decision documentation

Bank Secrecy Act (BSA): Federal law establishing anti-money laundering requirements and Know Your Customer (KYC) provisions

Dodd-Frank Wall Street Reform and Consumer Protection Act: Federal law containing various lending regulations and consumer protection provisions

State Usury Laws: State-specific laws setting maximum interest rate limits and related lending terms

State Securities Laws: State-specific regulations governing loans that might be considered securities

State-Specific Lending Requirements: Various state laws covering licensing requirements and mandatory disclosures for lending activities

Uniform Commercial Code (UCC): State-adopted uniform law, particularly Article 9 governing secured transactions, with state-specific variations

SEC Regulations: Federal securities regulations that may apply if the loan could be considered a security offering

Internal Revenue Code: Federal tax law governing the tax implications and treatment of loan transactions

Teams

Employer, Employee, Start Date, Job Title, Department, Location, Probationary Period, Notice Period, Salary, Overtime, Vacation Pay, Statutory Holidays, Benefits, Bonus, Expenses, Working Hours, Rest Breaks,  Leaves of Absence, Confidentiality, Intellectual Property, Non-Solicitation, Non-Competition, Code of Conduct, Termination,  Severance Pay, Governing Law, Entire Agreemen

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