Credit Evaluation School Instructor eBook - Oct 2023

SCENARIO 4

 Bank advanced $500,000 to a contractor for the purchase and renovation of a downtown building.  The price “as-is” was $250,000, with the remaining $250,000 to be used for the renovations.  The appraised value of the building was $250,000 “as-is” and $700,000 “as completed.”  The borrower has completed about half of the renovations and has drawn $100,000 of the $250,000 renovations line and expects to complete these renovations in next three months.

 For this loan, would you recommend:  Pass  Special Mention  Substandard

 Doubtful  Loss