Borrowers and lenders should always look to hire the most qualified third-party loan agent. Before hiring an agent, learn why they are vital to the process and what questions to ask.
Third-party loan agents are experts in administering loans.
- Third-party loan agents have experienced staff that understand credit administration.
- They have staff whose sole focus is the administrative functions of loan credits.
- Third-party loan agents have experience handling all types of loan transactions, across a wide variety of industries, from investment grade to distressed debt.
#2 Superior Systems and Controls
- Third-party loan agents will use a top-level software system to ensure accuracy, promptly distribute communications, monitor activity, and historically track the loan.
- They use a dual control system to ensure transactions are set up correctly, cash distributions are made correctly, and prevent fraud.
#3 Independent and Conflict Free
- A third-party loan agent is independent, impartial, and free of conflicts of interest.
- As a non-lender, the third-party agent’s focus is administering the loan, freeing the lenders to focus on lending.
#4 Facilitator that Follows Direction
- The job of a third-party loan agent is to follow the terms of the loan agreement and if discretion is required, to follow the direction of the lenders.
- A third-party loan agent’s role is administrative.
- They facilitate communication and transfers funds among the parties.
#5 Simplified Tax Reporting
- Third-party loan agents handle tax reporting on behalf of the borrower.
- They provide lenders with applicable tax documents for all payments pertaining to the loan agreement made through the year.
- Third-party loan agents file the required tax forms: 1099-INT (interest); 1099-MISC (fees); 1042 (for foreign lenders receiving interest or fees from a US Borrower)
#6 Collateral Tracking and Storage
- Third-party loan agents track the collateral pledged to the lenders.
- They securely store physical collateral pledged by the borrower.
Questions to ask before hiring a loan agent:
- How are clients’ needs met?
- What, if any, specialized services does the third-party loan agent offer?
- What is the turnaround time for inquiries, payments, notices, audit confirmations, and returning phone calls?
- How do you ensure deal information is accurate and correct?