Are loans secured by nonfarm residential real estate to finance small businesses “small business loans”?
A3. Applicable to banks filing Call Reports: Typically not. Loans secured by nonfarm residential real estate that are used to finance small businesses are not included as “small business” loans for Call Report purposes unless the security interest in the nonfarm residential real estate is taken only as an abundance of caution. (See Call Report Glossary definition of “Loan Secured by Real Estate.”) The agencies recognize that many small businesses are financed by loans that would not have been made or would have been made on less favorable terms had they not been secured by residential real estate. If these loans promote community development, as defined in the regulation, they may be considered as community development loans. Otherwise, at an institution’s option, the institution may collect and maintain data separately concerning these loans and request that the data be considered in its CRA evaluation as “Other Secured Lines/Loans for Purposes of Small Business.” See also Q&A ยง 345.2
