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.

#1 Expertise in Administering Loans

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 — Loan Servicing and Tracking

  • 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 Loan Agent

  • 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 Loan 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 transfer 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:

  1. How are clients’ needs met?
  2. What, if any, specialized services does the third-party loan agent offer?
  3. What is the turnaround time for inquiries, payments, notices, audit confirmations, and returning phone calls? 
  4. How do you ensure deal information is accurate and correct?
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