IBAM EP83: Loan Committee Basics: Why This Process Protects Entrepreneurs, Donors, and the Mission

“Loan committee is a proven way to improve decision-making and get loans repaid.”

— Steve Adams | IBAM

How IBAM’s loan committee process improves decision-making, strengthens repayment, and builds sustainable impact

Loan committee is a new experience for many IBAM partners. It can feel intimidating, unfamiliar, and even overwhelming at first—especially for those who have never sat in one before.

In this episode, Steve walks through loan committee basics, explaining why the process exists, how it works, and why IBAM is deeply committed to it. Drawing on 14 years of experience as a corporate banker—where he sat in loan committees weekly and often chaired them—Steve explains the fundamentals in a practical, encouraging way.

At its core, loan committee is not about pressure, punishment, or intimidation. It is a proven process designed to improve decision-making and increase the likelihood that loans are repaid. When followed faithfully, it protects students, trainers, partners, donors, and the mission itself.

What Is a Loan Committee?

A loan committee is a small group—sometimes as few as two people—who come together with a master trainer and a student to evaluate a loan request.

This process typically happens during Phase Two training and approval, after IBAM has funded a loan fund and partners are walking through the approval steps with students.

Loan committee exists because group decision-making produces better outcomes than individual decision-making. Steve explains that many of the loan problems he saw in banking came from small loans approved by individual loan officers using what was called “signature authority.” Over time, he reduced that authority and required nearly all loans to go through committee review.

Why? Because accountability and group wisdom matter.

Why IBAM Requires Loan Committees

Loan committee is not optional. IBAM requires it because:

It improves decision-making
It increases repayment rates
It introduces accountability
It protects people from unnecessary failure
It strengthens trust with donors

Steve explains that loan committee brings together the collective experience and wisdom of the group, rather than relying on one person’s judgment alone. He also emphasizes the spiritual dimension of this process, noting the value of seeking God’s wisdom together in prayer before making decisions.

When loans are evaluated together, assumptions are tested, blind spots are exposed, and better structures emerge.

The Purpose of Loan Committee

Steve outlines several clear goals for loan committee.

1. Test the Student’s Understanding

Students must be able to clearly explain:

Their business model
Their market
Their assumptions
How the business makes money

If the student cannot explain the business in a way the committee understands, that’s an important signal.

2. Create a Dialogue, Not an Inquisition

Loan committee is not meant to be punitive. It is not an interrogation. The goal is a back-and-forth conversation where questions are asked, answers are explored, and clarity is gained.

Interruptions should be minimal, limited to clarifying questions. Students should be allowed to finish their presentation before deeper discussion begins.

3. Encourage and Build Up the Student

The process should be:

Encouraging
Life-giving
Edifying

Even when the committee disagrees or challenges assumptions, it should do so in truth and love, displaying the fruits of the Spirit.

4. Arrive at the Best Deal Structure

Loan committee exists to help produce:

The best loan amount
The best structure
The best chance of success

Sometimes the right answer is yes. Sometimes it’s no. And sometimes it’s “not yet—go back, do more work, and return with a better plan.”

How the Loan Committee Process Works

A typical loan committee follows a clear structure:

Each student is given 10–15 minutes to present their business and loan request
The committee listens without interrupting
Clarifying questions may be asked
A dialogue follows the presentation
This process repeats for each student
The committee meets privately to decide whether to approve, decline, or require revisions

If additional questions arise, students can be called back in for further discussion.

Steve notes that when students and master trainers are properly prepared, loans are almost always approved. Declines typically happen when preparation was incomplete or assumptions were not thoroughly tested ahead of time.

The Role of the Master Trainer

The master trainer plays a critical role in loan committee success.

According to Steve, the master trainer’s job is to:

Prepare the student thoroughly
Test assumptions before loan committee
Iterate through business plans until they are sound
Never bring a weak or incomplete deal forward

Steve is very clear: loan committee is not the place to discover major problems for the first time. If a deal is yellow or red, it should never be presented.

If a deal reaches committee in poor condition, that signals a breakdown in preparation—not a failure of the process itself.

Underwriting Focus Areas Explained Simply

Steve walks through several underwriting principles that loan committees should focus on.

1. Apply Common Sense

Not everyone on loan committee will have banking or business experience—and that’s okay.

Everyone has common sense. Everyone is a consumer. Everyone can ask whether something makes sense or not.

Committees should also seek God’s guidance in prayer before making decisions.

2. Evaluate Research and Assumptions

Students must show they have done sound research and can justify their assumptions.

Steve warns about confirmation bias—our tendency to look for information that supports what we already want to believe. Loan committee exists, in part, to challenge that bias.

3. Review the Financials

Committees should ask:

Do the numbers show the loan can be repaid?
Is repayment achievable within a reasonable time frame?

Steve notes that service businesses should typically be able to repay within two years.

4. Ensure Margin of Error

Loan committee must ensure there is room for things to go wrong.

Plans should still work if the student misses projections by 10–20%. IBAM’s tools are designed to build in this margin, but committees must still use judgment.

Steve explains that approving a loan where nothing can go wrong is a recipe for failure.

5. Never Approve Yellow or Red Deals

This is non-negotiable.

Even green deals can be declined if assumptions don’t make sense. Tools do not make decisions—people do.

If a deal is yellow or red, the process should stop, and the student should return to the drawing board with their trainer.

Why Process Matters So Much

Steve emphasizes that IBAM’s process is intentionally rigorous.

Why?

Because IBAM is putting money into people’s dreams. Done poorly, lending can place people into debt they cannot manage, creating emotional and financial harm.

Loan committee is a partnership:

Students must do their work
Trainers must do their work
Committees must do their work

When everyone fulfills their role, the system works.

The Bigger Picture: Donors, Repayment, and Trust

Steve explains the practical reality behind this process.

He must go to donors around the world and ask them to fund loan programs. That only works when repayment rates are strong.

Repayment rates must be 8 or 9 out of 10
Anything lower undermines trust and sustainability

The loan committee process is what protects those outcomes.

When followed consistently, IBAM is already seeing strong results in multiple regions, with repayment rates significantly higher than before the process was implemented.

Commitment to Rigor Leads to Flourishing

Loan committee is not just about mechanics—it’s about calling.

Steve reminds listeners that entrepreneurship is a calling, not just a skill. The rigor of the process tests grit, perseverance, diligence, wisdom, and prudence.

When everyone commits to the process: