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Live Oak Bank is an FDIC-insured digital bank located in Wilmington, NC. Live Oak has only one branch, located at our headquarters, but we have a national lending footprint. Unlike most banks, we specialize in lending to small businesses in specific industries, one of which is independent investment advisors. Our bank focuses on the business cash flow. We are not bound by the same loan-to-value constraints as most traditional banks, which require collateral from their prospective borrowers. Another difference is Live Oak’s loan officers do not receive any commission for making loans. Our lenders prioritize the borrower’s best interest, not their commission. Our unique business model allows us to be both knowledgeable and flexible when lending.
Live Oak Bank offers a variety of small business loans, from government guaranteed loans to conventional loans. We are the number one SBA 7(a) lender by dollar volume* and we understand the nuances of SBA lending, which helps us streamline a process that can be difficult and bureaucratic in inexperienced hands. We take the time to assess every potential transaction individually to see what type of loan will be the best fit. Among financial advisors, we have lent SBA 7(a), SBA 504, lines of credit and conventional loans. Often, the SBA 7(a) product is the best fit for an advisor due to the terms of the loan. We’ll guide you through the process and craft a unique loan solution tailored to your goals.
*The data supplied by the SBA reflects 7(a) highest dollar volume during FY 2020.
From the time you submit a completed application to the time you receive funding; the typical turnaround time is 45-60 days. A loan officer will send you a proposal letter within 1-2 days of receiving your completed application. Once you execute and return the proposal, the loan will go to underwriting, which is the formal approval process. Underwriting typically takes 10 days. Once approval is complete, you will receive a commitment letter. As soon as you execute and return the commitment letter, the loan will enter into closing, a process that typically takes 3-4 weeks. A closing specialist on Live Oak’s staff will send you a list of initial documents to provide and schedule a kickoff call. Once you have provided a significant amount of the documentation requested, the specialist will schedule a date for closing. Of course, every loan is unique, and this timeline is not guaranteed.
The term of the loan depends on the loan type. If you are using a SBA 7(a)—the majority of our loans—the term will be 10 years. If you take out a conventional loan, the term will range from five to seven years. Our SBA loans do not have prepayment penalties, so you can pay them off early if you choose.
We offer both variable and fixed-rate loans. The interest rate is determined by a number of factors, including the risk associated with the transaction and whether the loan is variable or fixed.
Each loan has an origination fee and closing costs associated with it. The origination fee on a conventional loan is up to 2%, which is paid to Live Oak Bank. The origination fee for an SBA loan is a more complicated calculation but ranges from 1.5-2.8% and is paid directly to the SBA. Closing costs are outside expenses incurred during the loan process such as searches, cost to draft loan documents and valuations.
We offer loans for any business need that you might have as an independent financial advisor. Here are the typical uses for our loans:
Our underwriting process looks at three main factors: personal, business and equity. We look for borrowers with a 680 or better credit score that have not had any major credit delinquencies. In addition, we are looking for strong financial statements with a history of saving. On the business front, we focus on cash flow. Our cash flow requirement is 1.5x, which means 1.5 < annual free cash flow of business / total annual business debt payments. We look for at least 10% equity in every deal we do. The equity requirement can be met having an existing business, cash or a combination of cash and seller note on full standby. There are some other requirements that may be specific to your transaction.
The initial documentation list consists of application forms, personal and business tax returns, a profit and loss statement, balance sheet, assets under management and commissions report. You will be asked for additional documentation during the closing process, but the specific documents will vary.
The typical structure for an acquisition is as follows: the seller receives a portion of the purchase price in an upfront payment and then additional payments over time. The additional payments are often facilitated through an escrow account, promissory note or earn out. Outside of this framework there are many possibilities, and the best one will be determined by your individual situation. There are three components to an acquisition: price, terms and taxes.