What this checklist is for. Closing a secured commercial loan, from either side. For the negotiation that precedes it, see Negotiating a Commercial Loan Term Sheet.

Phase 1—Start the long-lead items on day one

The negotiation does not determine the closing date; these do.

  • Lien and litigation searches—UCC, tax lien, judgment, and bankruptcy searches in every state of organization and every state where collateral is located, plus a search of the borrower's prior names and any predecessor entities.
  • Payoff letters from every existing secured lender, with wire instructions and an agreement to deliver UCC-3 terminations and mortgage releases.
  • Landlord waivers for every leased location holding collateral, and bailee letters for collateral at a warehouse, a processor, or a consignee. These require a third party's cooperation and are the single most common cause of a delayed closing.
  • Deposit account control agreements and securities account control agreements, which require the depository or intermediary's signature and its own internal approval process.
  • Appraisals, field examinations, environmental site assessments, and surveys where real property is collateral.
  • Title commitment and the requirements to clear exceptions.
  • Insurance certificates with the required endorsements, which brokers frequently issue incorrectly the first time.
  • Flood determination and, if in a special flood hazard area, flood insurance in the required amount.
  • Third-party consents—franchisors, licensors, and counterparties to material contracts with anti-assignment provisions.
  • Regulatory approvals where the borrower is licensed.

Phase 2—Organizational and authority documents

For the borrower and each guarantor:

  • Certified charter documents—articles or certificate of incorporation, formation, or organization, with all amendments, certified by the secretary of state.
  • Bylaws or operating or partnership agreement, with all amendments, certified by an officer.
  • Resolutions of the board, members, or partners authorizing the loan, the grant of security, the guaranty, and the execution and delivery of the documents—and confirming that no consent beyond those obtained is required.
  • Incumbency certificate with specimen signatures of each signing officer.
  • Good standing certificates from the state of organization and every state of foreign qualification, dated recently.
  • Confirm the borrower's exact legal name as it appears in the public organic record, character for character—this is the name the financing statement must use, and a discrepancy renders the filing seriously misleading and the lien unperfected.
  • Confirm the state of organization, which determines where the financing statement is filed.
  • Confirm the capitalization and ownership, and identify anyone whose consent or joinder is needed.
  • Confirm every subsidiary required to be a guarantor is joined and that its assets are pledged, including any formed since the last financing.

Phase 3—Credit and security documents

  • Credit agreement or loan agreement, with the representations, covenants, events of default, and conditions precedent negotiated at the term sheet stage.
  • Promissory note or notes.
  • Security agreement, with a collateral description sufficient to create the interest and a separate description sufficient for the financing statement.
  • Pledge agreement for equity interests, with original certificates and undated stock powers or transfer powers executed in blank delivered to the lender, and—for uncertificated interests—the issuer's acknowledgment or a control agreement.
  • Guaranties, and where they are limited, confirm the cap, the release conditions, and whether liability is joint or several.
  • Mortgage or deed of trust, with the correct legal description, and an assignment of leases and rents where applicable.
  • Intellectual property security agreement, for recording with the Patent and Trademark Office and the Copyright Office.
  • Intercreditor or subordination agreements with any other secured party or subordinated lender.
  • Collateral assignment of key contracts, licenses, or life insurance where required.
  • Environmental indemnity, which typically survives repayment and is not subject to the loan's limitations.
  • Fee letter, and confirm the fees are consistent with the term sheet.
  • Confirm the borrowing base certificate, if applicable, is delivered and supports the initial funding.
  • Confirm the schedules and exhibits are complete—the disclosure schedules are where the representations are qualified, and blank schedules mean unqualified representations.

Phase 4—Perfection, by collateral type

Getting this wrong is the failure that surfaces years later, in a workout.

  • General intangibles, accounts, inventory, and equipment—file a UCC-1 in the state of the debtor's location (its state of organization for a registered organization), against the exact legal name, with a sufficient collateral description.
  • Confirm the filing is accepted and obtain the acknowledgment; a rejected filing perfects nothing.
  • Calendar the five-year lapse and the six-month continuation window, because a lapsed financing statement is an unperfected lien retroactively.
  • Deposit accounts—perfection is by control only, through a control agreement signed by the depository, or by the lender being the depository. A security agreement alone perfects nothing in a deposit account.
  • Securities and investment property—control agreements or delivery of certificates.
  • Certificated equity interests—physical delivery of the certificates with executed powers.
  • Titled goods—vehicles, trailers, aircraft, and vessels—perfected by notation on the certificate of title or by filing with the applicable federal registry, not by UCC filing.
  • Real property—record the mortgage or deed of trust in the correct county, and confirm recording.
  • Fixtures—a fixture filing in the real property records.
  • Intellectual property—record the security interest with the USPTO for patents and trademarks and with the Copyright Office for registered copyrights, in addition to the UCC filing.
  • Commercial tort claims—a specific description is required; a generic reference perfects nothing.
  • Letter of credit rights—control through the issuer's consent.
  • Purchase money priority—confirm the notification and timing requirements are met where applicable.
  • Collateral in other states—confirm what additional filings each location requires.
  • Run post-filing searches to confirm the lender's filing appears and that no intervening filing has priority.

Phase 5—Insurance, opinions, and the funds flow

  • Property insurance in the required amount, with the lender as loss payee and, for real property, with a standard mortgagee clause—which protects the lender even where the borrower's conduct would void coverage.
  • Liability insurance with the lender as additional insured where required.
  • Business interruption, flood, and any specialty coverage the loan documents require.
  • Notice of cancellation to the lender, and confirm the endorsement actually says so.
  • Key person life insurance with a collateral assignment where required.
  • Legal opinion from borrower's counsel—due organization and good standing, power and authority, due authorization and execution, enforceability, no conflict with organizational documents or material agreements, no required consents, and—where requested—perfection and priority opinions, which are narrower and more expensive than they appear.
  • Solvency certificate from an officer.
  • Officer's certificate confirming the representations are true and no default exists.
  • Closing funds flow—sources and uses, agreed in writing in advance, with payoff amounts confirmed by per-diem and wire instructions verified by callback to a known number, because payoff wire fraud is a real and recurring loss.
  • Confirm fees and expenses are paid or netted, and that the borrower has seen the invoice.
  • Confirm the conditions precedent in the credit agreement are each satisfied or expressly waived in writing.
  • Confirm the closing date, funding date, and effective date are consistent across documents.

Phase 6—Post-closing

  • Circulate the closing set—a complete indexed set of executed documents, to every party.
  • Confirm recordings are returned and UCC acknowledgments received.
  • Confirm the prior lenders' terminations are filed and that the searches now show only the new lender.
  • Track every post-closing covenant with a deadline and an owner—landlord waivers, control agreements, title endorsements, and any consent not obtained at closing. Post-closing items with no tracker are post-closing items that never happen, and each one is a default.
  • Calendar the reporting obligations: financial statements with their deadlines, compliance certificates with covenant calculations, borrowing base certificates, budgets, and insurance renewals. The most common event of default in a healthy company is a late financial statement nobody calendared.
  • Calendar the covenant test dates and run the calculations internally before the certificate is due.
  • Calendar the UCC continuation dates, five years out.
  • Calendar the insurance renewal and confirm the endorsements are reissued each year.
  • Confirm the borrower's obligations on new subsidiaries and new collateral—most credit agreements require joinder and additional filings within a defined period after formation or acquisition.
  • File the closing binder where it can be found, because the next transaction, the next workout, and the next diligence will all begin with it.

Common mistakes

  • A financing statement against the wrong debtor name, which is the most consequential clerical error in secured lending.
  • Filing in the wrong state, because the debtor's location was assumed rather than confirmed.
  • A security agreement in a deposit account with no control agreement, perfecting nothing.
  • Titled goods perfected by UCC filing, which does not work.
  • Commercial tort claims described generically.
  • Deferring landlord waivers and control agreements to post-closing, where they are never obtained.
  • No UCC-3 terminations from prior lenders, leaving stale filings ahead of the new lien.
  • Insurance certificates without the actual endorsements.
  • Payoff wires sent to instructions received by email, without callback verification.
  • No post-closing tracker, so each deferred item becomes a default.
  • No calendar for continuations, so the lien lapses in year five.

Primary authority

  • UCC Article 9, as enacted in the applicable state, including § 9-102 (definitions), § 9-108 (sufficiency of description), § 9-109 (scope), § 9-203 (attachment), § 9-301 through § 9-307 (choice of law and debtor location), § 9-310 through § 9-316 (perfection, including control and possession), § 9-317 through § 9-339 (priority), § 9-501 through § 9-527 (filing, including § 9-503 on the debtor's name and § 9-506 on errors that are seriously misleading), and § 9-515 (duration and continuation).
  • UCC Article 8 for investment property and control.
  • Federal recording regimes: 35 U.S.C. § 261 (patent assignments), 15 U.S.C. § 1060 (trademark assignments), 17 U.S.C. § 205 (copyright transfers), 49 U.S.C. § 44107 (aircraft), and 46 U.S.C. § 31321 (vessels).
  • Real property recording and mortgage law, which is state and county specific.

Related

This checklist is educational and not legal advice. Perfection and priority rules are state-specific and collateral-specific, and real property and federal recording requirements vary. Consult qualified finance counsel before closing a secured loan.