Certificate of Good Standing

A certificate of good standing is an official state-issued document that confirms a business entity is duly formed, has filed required reports, paid fees, and is authorized to transact business in the issuing jurisdiction. In commercial real estate lending the certificate serves as evidence that the borrower and guarantors are current with state filings and have not been administratively dissolved or suspended. Lenders typically require recent certificates from the entity’s formation state and any jurisdictions where it is qualified to do business to validate continued corporate existence and enforceability of loan documents.

Borrowers must obtain and deliver certificates of good standing from the relevant state agencies as part of loan closing deliverables and sometimes as part of ongoing covenant compliance. Closing counsel will verify that certificates are dated within a timeframe specified by the loan agreement and may request certificates for guarantors and related entities. If a certificate cannot be obtained, the borrower should provide an explanation and remedial documentation. Lenders use these certificates during diligence to confirm the borrower’s ability to legally execute financing documents and to reduce the risk of later challenges.

Certificates of good standing are important because they provide a formal, state-backed assurance of an entity’s legal existence and compliance with administrative requirements, which underpins the enforceability of loan and security documents. An absent or expired certificate can signal dissolution, suspension, or tax-related problems that jeopardize the lender’s remedies. For borrowers, maintaining current certificates avoids closing delays and demonstrates organizational health, reducing friction in fundings and covenant compliance checks throughout the loan term.