By Garnet Capital Advisors - Due Diligence is Crucial When Considering Loan Sales

Introduction

Loan sales can significantly benefit banks and other financial institutions, whether these organizations want to bolster their income by buying portfolios or free themselves up to issue more credit by selling them.

However, sellers will need to be familiar with the current compliance environment, which is intricate and constantly evolving. Sales that fail to address and successfully navigate this framework of rules and regulations can run into many different problems, including lowball price offers, failure to close and reputational damage.

To avoid these pitfalls, companies must perform the necessary due diligence and examine the many costs and benefits that come along with loan sales prior to entering the market. To start out, it may be beneficial to take a look at the history of these transactions.