At Live Oak Bank, we take pride in our efficiency and work tirelessly to ensure that the loan closing process moves along swiftly. As your loan progresses from one stage to the next, we strive to seamlessly hand the baton off to our internal teammates – getting your money to you as quickly as possible.
With that in mind, we also rely on you – the borrower – to participate in the loan closing process. If you want yourbusiness loan to close faster, Live Oak needs you to do your homework and have all the proper items ready to go. Some refer to this phase of the loan process as “The Great Paper Chase.” It may seem daunting, but we’re here to help.
We’ve put together a list of the most significant documents you must compile before the loan closes. Keep in mind this is not an official list but covers the most important and time-sensitive items needed in the loan closing process. Lean on your lender if you have any questions regarding the items listed below.
Items to be completed by the borrower
- Contact information for all of your professional advisors, including their name, address and phone number
- Business intermediary
- Business insurance agent
- Life insurance agent
- Franchisor (if applicable)
- Equity injection – this is your down payment. You’ll need to provide documents proving that this money was not borrowed. We will need three months of bank statements from any account the money will be originating from. Do not move this money at this point.
- Life insurance policies – including your life insurance policy, matching the loan amount and term, as well as the collateral assignment of life insurance.
- Franchise documents (if applicable).
- Business insurance policies – including business personal property insurance, business interruption and wind and hail, real estate hazard insurance if there’s commercial real estate (CRE) involved, and a general liability policy and vehicle insurance coverage. Ask for a copy from your agent.
- Secondary real estate collateral – if you’re pledging any real estate as secondary collateral for the loan, we’ll need mortgage statements and a copy of the declaration page of your homeowner’s insurance policy.
Items to be completed from your attorney
- Fully executed operating company legal documents – provide the legal documents for all companies. If the company has not been formed, you’ll need to engage your attorney to register the company with the Secretary of State as soon as possible. Documents vary depending on whether it’s a corporation or an LLC.
- Transaction documents – your attorney will need to prepare transaction documents for the review and approval by Live Oak Bank legal counsel. Included but not limited to: asset purchase agreement (stock), bill of sale, assignment assumption, non-compete agreement, promissory note, security agreement, etc. Ask your lender for the complete list.
- Title commitment and insurance – engage your attorney to prepare an updated title search and provide title insurance commitment for all properties being pledged as collateral for the loan. These will also need to be reviewed and approved by Live Oak Bank legal counsel.
Items to be completed by the seller/business intermediary
- Seller’s current property lease(s) – we’ll need a copy of the seller’s fully executed lease, along with all previous amendments and extensions, plus any renewal options available. The lease must match the term of the loan, including the initial term plus any renewal options.
- Seller’s equipment list – provide a copy of the current federal asset report and/or depreciation schedule generated by the seller’s accountant. Any items on this report that are not included in the purchase must be crossed out and initialed by both the seller and the purchaser.
- Seller’s business insurance policies – request copies of seller’s business insurance, and permission to contact their agent for a quote on policies. This includes business personal property insurance, a general liability policy and vehicle insurance coverage.
- Prepared financial statements – we’ll need the most recent month ended financial statements, including the balance sheet, profit and loss statement and aging reports for accounts payable and accounts receivable.
- Current business licenses and permits – including sales tax permits, professional/association licenses and/or privilege licenses.
- Seller’s customer agreements – this includes any written agreements with customers, along with sales by customer reports for last two completed years (if applicable).
- Seller’s vendor agreements – this includes any written agreements with vendors, along with purchases by vendor reports for last two completed years (if applicable).
- Seller’s company vehicles – including copies of vehicle titles and current registrations for all vehicles included in the purchase (if applicable).
If you’re purchasing commercial real estate, you will also need a Phase I Environmental Assessment (Phase I Report) for the commercial property you are buying. In most cases, Live Oak will order this report on your behalf; confirm with your lender.
The report must meet the following criteria and is subject to review and approval by Live Oak Bank
- This assessment must meet the current American Society for Testing and Materials (ASTM) standards, All Appropriate Inquires (AAI) requirements (including non-scope considerations like lead paint, asbestos, radon, etc.).
- The report must include a recommendation section as required by the Small Business Administration (SBA).
- Include a copy of the completed SBA Environmental Reliance Letter addressed to Live Oak Banking Company.
- Include a copy of the environmental consulting firm’s current certificate of professional liability insurance.
Consider Live Oak your ally – we want to move the loan closing process along as quickly as possible for all of our borrowers. When your loan reaches the closing stage, you play a critical role in keeping things moving forward. By collecting the necessary documents listed above, you are one step closer to getting your money. We understand this is a long list of items and we’re here to support you along the way.