A state-issued certificate confirming an entity exists and is current on its filings, usually dated within thirty days of closing.
The longer version
A good standing certificate is issued by a state's business filing office, usually the Secretary of State, and confirms that an entity exists and is current on its state obligations: annual reports filed, franchise taxes paid, and a registered agent on record. States call it different things, including a certificate of existence and a certificate of status, but the lender is asking the same question.
Lenders require one for every borrowing entity and usually for each entity guarantor, from the state of formation and from any state where the entity is registered to do business, which normally includes the state where the property sits. An entity that has fallen out of good standing may lack the capacity to sign, and a legal opinion that it is duly organized and validly existing rests partly on these certificates.
They go stale. Lenders want them dated close to closing, and some require a bring-down, confirmed by telephone or online lookup on the closing date. A certificate pulled at the start of a long diligence period is usually reordered at the end.
Most states now issue them online in minutes for a small fee. The delay, when there is one, is an entity that has quietly lapsed, because reinstating it means filing back reports and paying back fees before the certificate can issue. Pulling them early surfaces that problem while there is still time to fix it.
Common questions
- What is a certificate of good standing?
- A document from a state's business filing office confirming that an entity exists and is current on its state filings and fees. Lenders use it to confirm that the borrower and guarantors exist and have the capacity to sign the loan documents.
- How do I get a certificate of good standing?
- Order it from the Secretary of State or equivalent office in the state where the entity was formed, and in any state where it is registered to do business. Most states issue them online. If the entity has lapsed, it has to be reinstated first, which is the step that takes time.
- Why does a lender need a certificate of good standing?
- To confirm the borrower and guarantor entities legally exist and can enter the loan. Borrower's counsel also relies on the certificates when giving the opinion that each entity is duly organized and validly existing.
- How recent does a good standing certificate need to be for closing?
- Lenders usually want it dated within a short window before closing, and some require a bring-down on the closing date itself. A certificate pulled at the start of a long diligence period is typically reordered near the end.