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We have a possible loan of 1 Million for a business( business A) and one of the members (Business B) is an affiliate of our EVP. The EVP owns 25 % of business B . We found the following in the Reg o regulation.
“(2) In no event may a member bank extend credit to any insider of the bank or
insider of its affiliates in an amount that, when aggregated with all other
extensions of credit to that person, and all related interests of that person,
exceeds $500,000, except by complying with the requirements of this paragraph(B)”
Our question is can we make the loan for 1 million dollars if the affiliate ( Business B) owns 20% of business A.The EVP would not be a guarantor on the loan but are we limited because he has a 25% ownership in business B, And if we are limited, is the limit of $500,000.00 the loan amount or to his portion of the percent of ownership which is $50,000.00. ( the loan amount is $1,000,000.00 Business B owns 20% of business A so that would be $200,000.00. EVP owns 25% of business B so that would be $50,00.00.)
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