Time To Close the Loan? Will This Ever End?

Is this loan approval process ever going to end?  It can certainly feel that way.  However, be assured that if you have received, reviewed and approved the loan agreement and met all the lender’s pre-closing requirements, it will happen soon enough. 

As a last step, it’s important to understand what you will be doing the day of the closing.  Typically, you get a loan closing checklist from the lender or your business counsel.  This document lays out everything you will be signing or will need to bring the day of the closing.  Please make sure you have an experienced business counsel who can explain these items if you have questions. 

Below are some of the more common closing items/documents you will see besides the loan agreement:

1. Guaranty – This is the document, if required, that you or some other person or entity will sign to ensure that the loan gets paid in case you default.
2. Legal Opinion – This is basically the opinion of your attorney or other loan counsel which basically says the loan is enforceable and you or your entity are legitimate.
3. Perfection Certificate – This document describes any collateral that you own and any other details about you or your entity (e.g., Name, Address, Insurance Coverage, Real Estate, etc.).
4. Schedules – These are attachments to the loan agreement which lay out any required disclosures that you need to make related to the loan (e.g., subsidiaries, existing debts and liens, real property, lender commitments, litigation, liabilities, required consents and authorizations, etc.).
5. Deposit Account Control Agreement – This agreement allows the lender (or secured party) to obtain control over your deposit account (or accounts) in the event of a default.
6. UCC Financing Statements – These documents (which are filed in the state or counties that you do business in) show the lender’s priority position versus other creditors for the assets you pledged as collateral for the loan.
7. Mortgage – If real estate is involved or you pledged your own real estate for the loan, you may be required to sign a mortgage.
8. Good Standing Certificates – If your entity is borrowing money, the lender will typically require that you provide a current certificate of good standing from any state your entity is registered.
9. Flow of Funds Statement – This document shows how much is being borrowed, what fees are being paid, any existing debt that is being paid off and the net amount of the loan proceeds being disbursed.
10. Payoff Letter –  Existing lenders who are being paid off with the proceeds of the loan at closing send this letter to show the amount due.  
11. Resolutions – If its your entity that is borrowing the funds, then you will need to provide the lender a resolution which says you have the authority to execute the documents and close.  

There are many other documents that also could be required.  It is important that you are working with experienced business counsel when taking on a business loan.  Each of the lender required agreements has a particular purpose and should be understood by you or your team. 

As a side note, this will be the last MPL General Counsel Corner for 2022.  We want to wish everyone a Merry Christmas, Happy Hanukkah and Happy Holidays.  We look forward to reconnecting in 2023.
 
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• Hiring, Firing and Inspiring: Navigating 2023’s HR Challenges (eisneramper.com)

As always, please don’t hesitate to email myself (jsanders@mpl-law.com), Andy Miller (amiller@mpl-law.com), Christian Miller (cmiller@mpl-law.com), Erik Spurlin (espurlin@mpl-law.com), Brad Leber (bleber@mpl-law.com) or anyone in our office with questions or comments.   

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