It seems simple. You own a business, which requires loan funding - either to purchase immovable property or for other operational reasons. The business’s balance sheet is strong, you have offered a market-related purchase price for the property that the business intends to buy, or if you are using an existing property to secure the loan, its market value corresponds with the loan amount applied for. You approach your Bank, which agrees with all of the above, and approves the much-needed loan funding. Shortly thereafter, the Bank instructs its panel attorneys to proceed with the registration of a mortgage bond against the title deed of the property, which registration will allow you to draw down on the loan funding. Surely, you can expect the funds to appear in your business bank account shortly afterwards?

In reality, loan approval is only one step in the process. In order to ensure that both the borrower and the property satisfy its lending requirements, a Bank will require a range of documents and compliance certificates before providing its panel attorneys with permission to lodge a mortgage bond in the relevant deeds office. Any delay in obtaining these documents may postpone the registration of the mortgage bond and consequently, the release of the loan proceeds.

As a general rule, the following documents are required:

1. Borrower’s corporate documents

The borrower’s registration documents, shareholders register, share certificates and company organogram.

2. Tax compliance documentation

The borrower’s SARS tax clearance certificate and proof of its VAT registration.

3. Proof of business address

A recent utility account or similar document reflecting the borrower’s trading address, dated no more than three months before submission.

4. Audited financial statements

The borrower’s most recent audited financial statements, enabling the Bank to assess its financial position.

5. Property insurance

A copy of the insurance policy covering the buildings and improvements situated on the property.

6. Electrical compliance certificate

A valid electrical compliance certificate in respect of the property’s electrical installations, no more than 24 months old. Where a property is being purchased, the sale agreement will in the majority of cases require a seller to provide this certificate at its cost.

7. Town planning and zoning certificate

A certificate issued by the relevant municipality confirming the property’s zoning and applicable land use rights.

8. Fire safety compliance certificate

A certificate confirming that the building’s active and passive fire protection systems meet legislative requirements. Such a certificate is typically valid for 12 months from issue.

9. Certificate of identity

This certificate is issued by a land surveyor and confirms whether or not the buildings and improvements on the property encroach onto the building lines and/or boundaries of the property, or are built on registered servitude areas.

10. Lease documentation

If the property is subject to one or more leases, the Bank will require a copy of the lease agreement/s, as well as valid, authorising Board resolutions concluded by both the landlord and tenant. Where a lease has expired, an addendum or lease renewal will have to be drafted and signed by the parties to the lease

Although commercial loan approval is an important milestone, it does not guarantee immediate access to funding. Borrowers should ensure that all required legal, financial, and compliance documentation is available and up to date before the bond registration process begins, and work proactively with the Bank, its panel attorneys and other consultants to facilitate a smoother registration process. Doing so can help avoid unnecessary delays and ensure that funding is released as efficiently as possible.