Without more facts, we are unable to provide specific guidance as to whether your loans to both of these businesses should be aggregated for lending limit purposes. However, we can provide general guidance that may assist you in making this determination based upon the specific facts.
We spoke with an attorney at the IDFPR Division of Banking about this issue and were informed that the IDFPR would treat each business as a separate entity, even if one business owns the other business, and then decide whether to aggregate their loans on a case-by-case basis, using the factors in the IDPFR’s lending limit rules. The attorney noted that the IDFPR takes a more liberal approach to loan aggregation than the OCC, meaning that it will not require aggregation in every instance where the OCC rules require aggregation.
Specifically, under the IDFPR lending limit rules, loans to two separate businesses must be aggregated if “the credit worthiness of the one person does not justify the loan or extension of credit without reliance on the credit worthiness of the second person.” This analysis also should take into consideration the following factors from the Illinois lending limit rules. The IDFPR attorney noted that, in practice, this analysis often requires a cash flow analysis and a determination of each individual business’s ability to pay the loans on its own.
(1) Which entity is the source of repayment?
“Will the credit analysis and documentation on file at the bank at the time the loan or extension of credit was made substantiate that the one person has or will have the financial capacity to generate sufficient funds from his or her own assets and operations to repay the loan or extension of credit or is the source of repayment the second person?”
(2) Which entity will receive the primary benefit from the proceeds of each loan?
“Were the proceeds of the loan or extension of credit to one person used for the primary benefit of the one person or was a substantial portion of the proceeds used for the benefit of the second person without a corresponding economic benefit to the one person?”
(3) [A third factor applies only “in instances involving a guaranty or other secondary liability,” so it would not apply here, where there is no guarantee or other secondary liability involved.]
For resources related to our guidance, please see below:
- Illinois Banking Act — 205 ILCS 5/32 (general lending limit provisions)
- Illinois Lending Limit Administrative Rules — 38 Ill. Adm. Code 330.110 (loan aggregation rules)