Today’s Board Essentials Module 2: Restrictions on Loans to Directors

Since preferential treatment of directors is prohibited, a loan to a director (or the director’s immediate family or business enterprise) must be based on comparable rates, terms, and conditions as loans to other members. In addition, if the director serves as a borrower, co-signer, or guarantor, loans aggregated in excess of $20,000 must be approved in advance by the board, and the interested director must abstain. Regulators require strict compliance with these rules, so it is imperative that all directors understand the restrictions.