What Is a Certificate of Good Standing and How Does It Impact Your Business Acquisition?

During due diligence, you’ll gather financials, inventory lists and tax returns, but don’t forget the certificate of good standing (CGS). This document verifies that a company is properly registered and in compliance with state requirements. SBA lenders, attorneys and buyers all rely on this certificate to confirm a seller’s legal authority to transfer the business.

Understanding the CGS

A certificate of good standing, also known as a certificate of existence, is issued by the secretary of state where the business is registered. It attests that the company has filed annual reports, paid franchise taxes and maintained its registration. If a business is delinquent, it may be administratively dissolved and lose the ability to sell assets or enter contracts.

When to Obtain a CGS

• Pre‑LOI and LOI Stage: Before you sign an LOI, ask the seller to provide a current certificate of good standing. Knowing what happens after a Letter of Intent is signed includes verifying legal status.
  
• Loan Application: Lenders require the CGS as part of the SBA loan process. They confirm the entity is valid, ensuring they can perfect liens on collateral.
  
• State Registrations: If the company operates across state lines, collect certificates from each state.
  

Why It Matters for SBA Loans

The SBA requires documentation to confirm the seller has authority to sell the business and that no compliance issues exist. A missing or expired CGS can delay funding and raise concerns about hidden liabilities. This is particularly important for multi‑state companies or those with complex structures (e.g., SPVs).

How to Obtain the Certificate

Contact the relevant secretary of state’s office or use an online business portal to order the certificate. Fees range from $10 to $50 per state, and expedited services are often available. Plan for processing time so you don’t delay your SBA loan application or due diligence schedule.

PCA’s Support

At Pioneer Capital Advisory, we guide buyers through the SBA loan process—helping them identify and assemble the documents lenders need, such as financial statements, tax returns and, where applicable, certificates of good standing. While we’re not a law firm, our team works closely with buyers and legal advisors to ensure these documents are prepared and integrated into your loan package, so administrative details don’t derail your financing.

Closing Section

A certificate of good standing is more than a piece of paper, it’s proof your seller has the legal authority to sell. Don’t let administrative lapses derail your SBA loan or acquisition timeline. Pioneer Capital Advisory collects and reviews these documents as part of our comprehensive due diligence support. Ready to streamline your purchase? Get in touch today.