skennedy@hrslaw.com
 Review Carefully
 Check Note repayment terms
 Check names
 Check collateral
 Check equity
 Check use of proceeds
 If Authorization is incorrect, prepare change letter
and send
 If you have any doubt about what is in the
Authorization do a change letter
 Collect and submit timely
 Only get one form signed
 MUST HAVE AN AUDIT TRAIL
 Must comply with use of proceeds in Authorization
 Must match disbursements with use within 10%
 Watch out for EPC/OC. No Working Capital
 Have reviewed by experienced person
 Less is more, the more exceptions the less coverage
 Watch out for:
 Use covenants
 Existing liens
 Some standard Endorsements
 Oil and Gas
 Should have with new construction
 Look for encroachments
 Look for access
 Verify balance
 Determine if Open End
 Watch for HELOC
 Future Advances
 Check all jurisdictions
 Check Bankruptcy
 Check Judgments
 Credit Report will have
 Order right away to avoid problems
POST CLOSING UCC SEARCH:
 Verify Priority
 Good to pre-file
 Be certain of name
 Be certain of where to file
 Watch out for collateral that must be in possession of
Secured Party (stocks)
 Process filing takes 7-10 business days
 Pre-file
 Similar to Security Agreement
 Sometimes done if business is licensed
 May need to posses stock
 Need for uncertificated stocks, investment accounts,
etc.
 Only way to get to the Collateral and only way to
perfect security interest
 Done with Stock Certificates
 Sign in blank
 Must match term of Loan
 If you don’t care do a change letter because
Authorization requires the term of the lease to be as
loan as the loan
 May include renewal options as long as tenant can
exercise unilaterally
 Subordinate Landlord lien to Bank lien
 Must be able to cure default, so need notice of
default and opportunity to cure
 Must have access to collateral
 Problem if you don’t get it
 Rare, but sometimes required
 Difficult to get
 May not want it
 A license is a privilege
 In Pennsylvania you can take security interest but
subject to Liquor Control Board
 You can get interest in the ability to transfer
 General Intangible under UCC-1; someone else may
have a lien already
 Should be mentioned in both the Security Agreement
and the UCC-1
 If the business closes down, you may want to remove
the license
 Good to have so that you can work with Liquor
Control Board and taxing authorities, Pennsylvania
Department of Revenue
 Allows lender to execute transfer documents and fill
out forms
 Whole process in SOP
 Be sure you have all the Franchise Documents and all
signed
 Franchisor should certify that these are all the
documents
 Careful! May render Loan ineligible!
 Requires notice of default and opportunity to cure
 Defer franchise fees is Loan is in default (hard to get)
 Access to Franchisor’s books as they pertain to
Borrower
 Make sure in place
 Change Endorsement
 Copy of Declarations page
 Mortgagee/Lender Loss Payee
 Must have if they have employees
 Be certain Insured is correct
 Owner may be other than insured
 Copy of the policy
 Term long enough for loan?
 Be sure in correct amount
 Must be signed by OWNER of the policy
 Must not be assigned to anyone else
 Must be correct Insured
 Must be correct Amount
 Must be assigned as Collateral, NOT CHANGE IN
BENEFICIARY
 Check all parties
 Be sure allow for Confession of Judgment whether a
GP or an LP
 If not all Partners must sign authority of one Partner
to sign Confession of Judgment
 Get copy of Standby Note
 Compare to be sure it is correct
 Be sure you have payee on Note as Standby Creditor
 If no Note, tell them to draft one
 Have Note endorsed as follows:
 “This Note is subject to the terms and conditions
of a Standby Creditor’s agreement between
Payee and ____________ (Bank) dated the
_____ day of _____________, 20__”
 Critical
 I prefer an Affidavit
 One of the first things looked at
 Cash is King
 In kind must be supported by appraisal (I would be
sure SBA agrees)
 Careful about where it comes from, there are many
specific rules about this
 Purchase of more than 51% of assets
 Pennsylvania Department of Revenue clearance
 Escrow/Indemnification
 Verify payment of seller taxes
 Important as this is required by Authorization under
collateral where security interest is listed
 Should have list of all equipment
 All equipment over the value of $5,000 should have a
complete description with serial number
 Good way to track use of proceeds
 Same as a Deed for personal property
 Must have EIN
 If Borrower requires a license, need a copy (attorney,
barber, restaurant with liquor license, dentist, doctor,
etc.)
 Pennsylvania contractors are required to have
permits
 Good to have in a business acquisition
 Be sure the principal or principals of the seller are
bound. No good if seller is a corporation and person
that can compete is an individual. They are not
bound.
 Protects Lender and Borrower
 Must match use of proceeds
 Need if you have to complete work
 Post closing
 Very important for new construction and leasehold
improvements
 New construction only