In one sentence
The loan's schedule of borrower financial deliverables: operating statements, rent rolls, budgets, and certifications, on defined dates.
The longer version
Loan agreements specify what the borrower must deliver and when: quarterly operating statements, annual audited financials, updated rent rolls, and compliance certificates. These feed covenant testing and watch-list monitoring.
Chasing late reporting is a perennial servicing task. When deliverables are tracked as dated items with reminders, the chase shrinks and the covenant tests actually happen on time.
Common questions
- What financial reporting does a commercial loan require?
- Usually quarterly operating statements and rent rolls, annual financial statements, annual budgets, and guarantor financials, with officer certifications, on deadlines set in the loan agreement.
- What happens if a borrower misses reporting deadlines?
- It is typically a covenant breach after notice and a cure period, and the lender may charge a fee. More importantly, covenants cannot be tested without the reports.
- Why do lenders want guarantor financials every year?
- Because the guaranty depends on the guarantor's net worth and liquidity, which can change. Many guaranties include covenants to maintain minimum levels.
Keep reading