Live Oak Bank - Think long and hard...

“When you borrow from a small bank, you get a partner. When you borrow from a large bank, you get a policy.” Choose your partners wisely. This is the condensed summary of my experience with Live Oak Bank (LOB) providing $8.5m of financing for a self-funded business acquisition through the SBA 7A loan program. This is a complex story and there will admittedly be many details omitted for the sake of brevity. Think long and hard about who you borrow from, especially when providing a personal guarantee. 0 Months – LOB was great helping to close the initial loan. 2 Months - Post closing, we encountered significant challenges attributed to the integrity of the business. That larger story can fill a book. It won’t be covered here but every detail was documented and shared with LOB as it occurred. 9 Months – A lawsuit is filed by the previous owners because the seller’s notes payments are rightfully not being made. The business is prohibited from making any seller’s note payments due to not meeting the lender mandated DSCR. This is officially coordinated with all involved parties. LOB agrees to defer 3 months of loan payments which helps cash flow. 13 Months - LOB agrees to subordinate the business’s AR to a local bank as collateral towards a LOC. 14 Months – The sellers exercise a confession of judgement from the seller’s notes to garnish all company bank accounts, our LOC and over $5m of AR without any notification or opportunity to cure. This act blatantly violates the SBA stand-by creditor agreements. The company closes 2 weeks later, and 80 employees lose their jobs. Our legal team, along with our surety and a large GC file 3 emergency motions with the court to pause the Garnishments. The court would not hear our case early. It’s worth noting that there was already a case on the docket to hear all related issues. The legal process was completely sidestepped. LOB expresses little to no interest in rectifying or participating in this catastrophe despite overlooking the confession of judgement clause during underwriting. Eventually, LOB is convinced to hire local council to participate in the matter. From this point on LOB does not substantially participate in protecting its investment despite a substantial body of evidence to support a countersuit on many fronts. 18 Months – All company assets are auctioned. We help in every way possible to collect funds to service the debt. 21 Months – The company declares Bankruptcy We offer LOB numerous opportunities to litigate since the bank now holds all causes of action against the sellers post-bankruptcy. 25 Months – We receive a foreclosure notice on our home due to the second deed without any notification or communication from LOB. 33 Months – LOB accepts our Offer in Compromise (OIC) and endorses it with the SBA. 36 Months – LOB sells the causes of action back to the sellers for $40k. The sellers purchase millions of dollars’ worth of liability back from the bank through the Bankruptcy. The SBA makes a reasonable request for additional supporting documentation for the OIC but after the bankruptcy, LOB will no longer participate in the process or even refer us to a POC for the case. We now must start the OIC process all over again directly with the government. LOB completely quits on us despite being so close to a resolution. We were engaged and transparent at every step of the journey because it was the right thing to do. LOB bank’s special assets department and council have never once answered or returned a phone call since the business shut down. Any responses have been appallingly apathetic at best despite there being numerous options and offers to improve this situation for everyone involved including the bank.