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Live Oak Bank Small Business Loan Review

Live Oak Bank, based in Wilmington, N.C., is among the largest lenders of loans (based on approval amounts) backed by the U.S. Small Business Administration (SBA). The bank specializes in acquisition financing for businesses nationwide, as well as industry-specific lending for many fields, including dentistry and veterinary medicine, craft breweries and educational services.

SBA loans have favorable interest rates and terms, making them a desirable source of funding for business owners. But as a traditional financial institution, Live Oak Bank typically prefers borrowers with substantial financial histories who can meet its credit requirements. Make sure your business meets Live Oak’s requirements before applying for a small business loan.

Live Oak Bank review: What’s offered?
Who is eligible for Live Oak Bank’s business funding?
Live Oak Bank review: Pros and cons
FAQs

Live Oak Bank review: What’s offered?

Live Oak Bank’s main offering is SBA 7(a) loans. In fact, the bank is the SBA’s most active 7(a) lender, as of June 30, 2020. Although 7(a) loans are the bank’s primary financing option, other types of business loans are available.

SBA 7(a) loans from Live Oak Bank
Amount Terms Interest rates Fees
7(a) loan $5,000,000 Up to 300 months
  • Variable: Prime rate plus 2.25% to 4.75%
  • Fixed: Prime rate plus 5% to 8%
0.00% - 3.75% guaranty fee and
0.55% annual servicing fee for loan terms longer than one year; prepayment could incur a 1% to 5% fee depending on how much you pay and when.
CDC/504 loan Up to $20,000,000 Up to 300 months About 2.81% to 4.00% About 3.50%, plus up to 1% in annual fees

SBA 7(a) loans

The 7(a) loan program is the SBA’s primary offering for general business financing. Standard 7(a) loans are available up to $5,000,000. Repayment terms are based on the assets that the loan is financing. Loans for working capital, inventory or equipment must be repaid in 10 years, while loans for real estate must be paid back in 25 years.

The SBA guarantees a portion of the loan — up to 85% of loans of $150,000 or less, and up to 75% of loans exceeding $150,000. The SBA also caps the variable and fixed interest rates that Live Oak can charge, based on the length of individual loans.

Limits on variable rates are as follows:

  • Loans less than 7 years:
    • $25,000 or less: Prime rate plus 4.25%
    • $25,000 to $50,000: Prime rate plus 3.25%
    • Over $50,000: Prime rate plus 2.25%
  • Loans 7 years or longer:
    • $25,000 or less: Prime rate plus 4.75%
    • $25,000 to $50,000: Prime rate plus 3.75%
    • Over $50,000: Prime rate plus 2.75%

Fixed rates are based on the Prime rate plus 5% to 8%; as of July 2020, the prime rate is 3.25%. The SBA also charges 7(a) loan fees that range from 0.00% - 3.75%. For loans that are more than $1 million, borrowers owe a 3.5% fee on the guaranteed portion up to $1 million, plus 3.75% on the guaranteed portion exceeding $1 million.

You may also incur a fee if you pay down your loan ahead of schedule. For 7(a) loans with terms exceeding 15 years, any voluntary payment of 25% or more of the loan amount in the first three years could result in a subsidy recoupment fee. The fee would be 5% in the first year, 3% in the second year and 1% in the third year.

SBA CDC/504 loans

Live Oak issues SBA CDC/504 loans, which are designed for real estate costs and building expenses. The CDC/504 loan structure includes 40% of the loan amount provided by the SBA and up to 50% from a partner lender. The borrower is expected to contribute the remaining 10% of the loan, though they may be required to provide up to 20% in some circumstances. Live Oak caps its contribution at $20,000,000 for CDC/504 loans.

Repayment terms may be as long as 300 months. Interest rates are based on the rates for five- and 10-year U.S. treasury bonds, as well as the length of the loan (as of July 2020):

  • 10-year terms: 2.4%
  • 20-year terms: 2.35%
  • 25-year terms: 2.4%

Borrowers must pay loan fees that include servicing costs and guaranty fees. The fees usually amount to around 3.50% but may vary based on your individual loan.

USDA loans

USDA business loans are similar to SBA loans — Live Oak partners with the U.S. Department of Agriculture to provide funding to small businesses. USDA loans are intended to improve economic opportunities and self-sustainability in rural communities. Live Oak offers the following USDA loans:

  • Business and Industry (B&I) loans: Loans up to $25,000,000 with repayment terms up to 360 months.
  • Rural Energy for America Program (REAP) loans: Loans up to $25,000,000 with repayment terms up to 360 months.
  • Water and Environmental loans: Depending on the business structure, borrowers could receive $100,000,000 to $200,000,000 with terms up to 480 months.
  • Community Facilities loans: Loans up to $100,000,000 to $200,000,000 with a maximum of 480-month repayment terms.

All USDA loans include the following fees: origination, USDA guaranty, annual renewal and prepayment penalties. Time to funding for USDA loans is typically at least 120 days.

Commercial lending

In addition to federally backed lending, Live Oak offers its own commercial loans and asset-based lending.

Commercial loans are available up to $15,000,000, with repayment terms ranging between 24 and 84 months. Live Oak does not disclose interest rates for commercial loans, and commercial loans do come with an origination fee. You could receive your loan in at least 60 days, which is about the same amount of time it would take to receive an SBA loan.

Asset-based loans are offered between $500,000 and $10,000,000. Asset-based lending requires borrowers to offer specific assets as collateral to secure the financing. Terms range from 12 to 36 months, and Live Oak does not disclose rates upfront. You could receive funding in as little as 30 days, which is the fastest timeline compared to other Live Oak products. Live Oak’s asset-based loans require three years of financial and credit information, and you would also owe an origination fee and a servicing fee.

Live Oak Bank business savings account

Alongside financing, Live Oak offers a high-yield savings account for businesses as well as business CDs. The APY for the FDIC-insured business savings account is 0.70%. Live Oak Bank CD rates are 0.60% APY-0.80% APY for 6 months to 5 years.

Live Oak doesn’t charge monthly maintenance fees and doesn’t require a minimum balance in your business bank account. However, there are miscellaneous fees ranging from $10 to $50, including those for non-sufficient funds, incoming and outgoing wires, dormant accounts and legal actions, such as garnishments.

Business owners can open and manage the account online or through Live Oak’s mobile app. You can transfer funds into the account electronically, as Live Oak doesn’t accept cash deposits.

Who is eligible for Live Oak Bank’s business funding?

Live Oak Bank caters to a wide range of businesses. However, to be approved for an SBA loan from Live Oak, you’ll need to meet SBA borrower requirements.

At a minimum, business owners must meet the following criteria:

  • Must operate for profit
  • Must do business in the U.S. or its territories
  • Must have a “reasonable” amount of equity invested in the business
  • Must have sought other financial resources before applying

Additionally, SBA borrowers usually need at least two to three years in business. Live Oak may specifically require three years’ worth of business tax returns.

Live Oak has teams that specialize in certain industries and types of financing, such as asset-based lending and commercial real estate lending. Live Oak’s lending teams focus on businesses such as:

Business owners not eligible for financing

Businesses engaged in illegal activities, or those in vice industries such as gambling, are not eligible for SBA loans. The SBA also restricts funding to a number of other companies, including:

  • Real estate investment firms
  • Firms dealing in speculative activities
  • Rare coin and stamp dealers
  • Firms involved in lending activities
  • Pyramid sales structures
  • Charitable, religious or other nonprofit institutions

Live Oak also does not approve SBA loans for businesses with bankruptcies.

What you need to apply

The documentation you’d need would depend on the specific loan you’re seeking. Generally, though, Live Oak reviews your past business management experience, collateral and ability to repay debt.

Here are a few items you could expect Live Oak to require:

  • Personal financial statement: Illustrate your cash flow based on your income, outstanding debts, monthly overhead and the value of your assets.
  • Expected use of funds: Explain how you would use your funds if approved for the loan.
  • Profit and loss statements and balance sheet: Show how your business has performed year to date in a profit and loss statement. Your balance sheet should be dated within 90 days.
  • Personal and business tax returns: Provide three years of tax returns to verify your annual income, as well as three years of business tax returns if you own other businesses.
  • Business debt schedule: Disclose your existing obligations, including any current business loan, line of credit or lease debt that you owe.
  • Resume: You may need to provide your resume to show experience successfully managing or running a business. This would increase the bank’s confidence that you would repay your loan.

Live Oak would also need your permission to check your credit score, and would likely be looking for a score in the high 600s. Be sure to check your FICO Score and make any needed improvements to your credit profile before applying.

Time to funding

Banks usually take longer to fund business loans than alternative online lenders, many of which advertise 24-hour approval. It could take three to five business days to prequalify for a loan from Live Oak, and at least two months overall to receive your funding.

However, Live Oak has Preferred Lender status and can approve loans without waiting for the SBA’s approval. Live Oak’s online loan process could move from application to closing in 20 days for loans under $350,000.

Live Oak Bank review: Pros and cons

Consider a few potential advantages and downsides of working with Live Oak Bank before applying for a small business loan.

Pros

  • Large funding amounts available.
  • SBA cap on interest rates and long repayment terms.
  • Specialized lending tailored to many types of businesses.

Cons

  • SBA loans are the primary funding option.
  • Potentially slow time to fund.
  • High credit score and extensive documentation required.

FAQs

Where is Live Oak Bank?

Live Oak Bank is based in Wilmington, N.C. However, businesses across the U.S. can take out loans or open a savings account through Live Oak.

Can I apply for a loan online?

Live Oak does have an online application process, but first, you must contact a Live Oak loan specialist to get started. You can complete your contact form online.

Can I get a Live Oak business loan with bad credit?

No, you likely would not be approved for a loan through Live Oak if you have poor credit. While Live Oak does not provide credit score minimums, banks typically prefer a borrower with credit scores in at least the high 600s.

 

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