§ 18023 Industrial Loan Borrowing Limits

• •Borrowing over 300% of capital stock, surplus and undivided profits is prohibited without written commissioner consent.
• •Borrowings over 150% must be unsecured or pre‑approved in writing and are treated as investment or thrift certificates.
• •The limits are based on the company's outstanding capital stock, surplus and undivided profits.

A small industrial loan company wants to borrow $1 million to fund new loans, but its capital stock, surplus and undivided profits only allow a borrowing limit of $300,000 without extra approval.

Because the $1 million loan is more than 300% of the company's capital base, the company must either sell investment or thrift certificates to raise the money or get written consent from the commissioner. If it borrows more than 150% of its capital base, the loan must be unsecured or pre‑approved in writing and will count as a certificate for ratio calculations.