Approval feels like the end. It is the start of a distinct phase with its own failure modes, and the failures here are almost never about credit. They are administrative: an insurance certificate with the entity name slightly wrong, a payoff letter that expired while a signature was chased, a lien from 2019 that was satisfied and never terminated, an operating agreement that does not clearly authorize anyone to borrow.
None of those is difficult. All of them take days when handled reactively and hours when handled in advance, and the difference between an approved file that funds in a week and one that funds in three is usually which of those two approaches the borrower took. This article covers what conditions are, who produces each one, which ones reliably slip, and how to work the list so nothing waits on you.
What conditions precedent actually are
A commercial approval is conditional by design. The credit decision says: on these facts, we will lend, provided the following are true and evidenced at funding. The conditions list is that provision, itemized. Some conditions confirm facts the underwriting assumed. Some perfect the lender's collateral position. Some are housekeeping that could not be completed earlier.
They generally are not negotiable, and it is not worth spending energy trying. What is worth doing is reading the list the day it arrives, assigning an owner to every line, and identifying which items depend on someone outside your control, because those are the ones that need to start immediately.
The conditions list, and who produces each item
| Condition | Who produces it | Directional lead time |
|---|---|---|
| Certificate of good standing | State filing office | Same day to several days, longer if a filing lapsed |
| Entity resolution authorizing the borrowing | Borrower, from governing documents | Hours, if the documents are current |
| Insurance with lender named correctly | Insurance agent | Several days, often two rounds |
| Payoff letters for retired obligations | Existing lenders | Two to five business days, with short validity windows |
| Lien releases and UCC terminations | Existing lienholders | Days to weeks, and the slowest for old filings |
| Updated interim financials | Borrower or bookkeeper | Days, less if the monthly close is current |
| Title commitment and any curative work | Title company | Weeks, unpredictable if a cloud is found |
| Appraisal or valuation review | Third-party vendor and lender review | Weeks, plus review time |
| Tax and judgment searches | Lender or search vendor | Days, longer if something surfaces |
| Signed loan documents and disbursement instructions | Borrower and closing team | Scheduling, plus verification |
Scan the middle column. On a typical list, you personally produce two or three items. Everything else comes from an agent, a state office, an existing lender or a vendor, which means your real job is not producing documents. It is chasing them, starting the day the list arrives.
Insurance is the number one delay
More approved files slip on insurance than on anything else, and the reason is mundane. The lender needs specific language: the exact legal entity name, the correct address, minimum coverage amounts, and itself named as mortgagee, loss payee or additional insured depending on the collateral. Agents produce certificates constantly and often issue a standard one that misses a detail.
The fix is procedural. Forward the lender's exact requirement language to your agent the same day you receive it, ask for a draft certificate before issuance, and send the draft to the closing team for review. Two extra emails replace a rejection cycle that regularly costs the better part of a week.
Payoffs and lien releases
If any proceeds retire existing obligations, the lender pays those lenders directly rather than sending you the money. That requires a payoff letter from each: the exact amount to satisfy the debt on a stated date, per-diem interest, and wire instructions. Payoff letters have short validity windows, so timing matters: requested too early they expire, requested too late they hold up funding.
Lien releases are the slower cousin and deserve early attention. An old filing that was paid off years ago but never terminated still appears in a search, and clearing it means finding someone at the original lender who will file a termination. If that lender has been acquired, merged or dissolved, this can take weeks. Run your own lien search before you are anywhere near closing.
Entity housekeeping
Three items catch borrowers repeatedly. First, good standing: an annual report that went unfiled two years ago means the state does not consider the entity current, and reinstatement takes time. Second, authority: the operating agreement or bylaws must actually permit the entity to borrow and identify who can sign, and older documents sometimes require consents that have to be gathered. Third, ownership: the registered ownership must match what the file says, including any change since the underwriting began.
All three are checkable today, for free, in about twenty minutes. Doing it before an approval exists means any problem gets fixed in parallel with underwriting rather than at the end, when it is the only thing standing between you and funding.
Funds to close and wire discipline
Many closings require money from the borrower: a down payment, an equity contribution, prepaid escrows, third-party costs. Confirm the amount and the deadline early, and confirm what form is acceptable, since wired funds are often required and personal checks frequently are not. Where the funds come from also matters: sourcing and seasoning requirements apply in several programs, and a large recent deposit from an undisclosed source can raise a question at exactly the wrong moment.
The closing package itself
At signing you will typically execute a note, a security agreement or mortgage, personal guarantees, a disbursement authorization, borrowing resolutions, and a set of certifications and disclosures. Ask for the package in advance rather than reading it at the table: most closing teams will send it, and reading a hundred pages in a conference room under time pressure is how borrowers discover terms after the fact.
Verify that the documents match the term sheet on payment, term, amortization, rate structure, fees, collateral and guarantee scope. Some drift between a summary and final documents is normal; a material difference is not, and raising it before signature is straightforward while raising it afterward is not.
After funding: the obligations that start immediately
Closing creates a schedule. Reporting obligations begin from the closing date, insurance must be maintained with the lender named through every renewal, covenant tests start on their stated cycle, and any balloon date belongs on a calendar the day you sign rather than three years later.
The most common technical default in commercial credit is a missed report, not a missed payment. Ten minutes with a calendar at closing prevents the great majority of them.
The closing checklist
Work the list the day conditions arrive
- Assign an owner and a due date to every condition, including the ones a third party produces.
- Send the lender's exact insurance language to your agent immediately and request a draft certificate for review.
- Confirm the certificate names the exact registered entity, not a d/b/a or a shortened version.
- Request payoff letters for every obligation being retired, and note each expiration date.
- Run your own lien search and start terminations on anything satisfied but still filed.
- Pull a certificate of good standing and reinstate the entity if any filing lapsed.
- Locate the operating agreement or bylaws and confirm who is authorized to borrow and sign.
- Refresh interim financials so nothing in the file is more than a month stale.
- Confirm funds to close: amount, deadline, acceptable form, and the source of the money.
- Request the closing package in advance and compare every economic term to the term sheet.
- Verify all wire instructions by phone using a number you already had.
- Calendar every post-closing report, covenant test, insurance renewal and balloon date before you leave.
- Keep a complete signed set with all exhibits, schedules and the final disbursement statement.
Can conditions be waived?
Occasionally, and rarely the ones that matter. Conditions that perfect collateral, confirm insurance or evidence legal authority are effectively fixed because they protect the lender's position. Some documentation timing can be adjusted, and a post-closing condition with a deadline is sometimes available. Ask, and expect the structural ones to hold.
How long does closing take once conditions are issued?
It depends almost entirely on the slowest third party on the list, which is usually title work, an old lien release, or an insurance rework. Files where the borrower starts every item the day the list arrives close materially faster than files where items are handled sequentially. Actual timing varies by lender, program and collateral.
Why does the lender pay off my other loans directly?
Because the approval was underwritten on a pro-forma schedule where those obligations no longer exist. Direct payoff guarantees the assumption is true and produces the lien releases the lender needs. It also means your net proceeds are smaller than the face amount, which is why confirming the net figure early matters.
What if the appraisal comes in lower than expected at this stage?
The advance rate applies to the lower value, so the facility shrinks or requires additional equity at closing. Options generally include contributing more cash, pledging additional collateral, renegotiating the purchase price where applicable, or requesting a review if there is a factual error in the report. Outcomes vary by lender and program.
Do I have to close in person?
It varies by lender, collateral and jurisdiction. Many commercial closings are handled remotely with electronic signature and notarization, while mortgage closings often require wet signatures and a notary for recorded documents. Confirm the format early, because scheduling a notary or a signing appointment can itself add days.
What is a post-closing condition?
An item the lender permits you to deliver after funding, within a stated deadline: a recorded document, a final lien release, an updated certificate. They are genuine obligations and missing one can constitute a default even though the money already moved. Calendar them exactly as you would a payment.
My approval is aging while I wait on title. Will it expire?
Approvals and term sheets typically carry expirations, and supporting documents go stale on their own schedule: statements, financials, payoff letters and title commitments all have shelf lives. A refresh usually means submitting updated documents rather than re-underwriting from scratch. Tell the lender early if a third party will push you past a date rather than letting it arrive.
What is the single most useful thing I can do at this stage?
Get the insurance certificate right on the first attempt. It is the most frequent cause of rework in closing, it is entirely preventable with a draft review, and it usually depends on someone who does not know the closing date unless you tell them. One phone call to your agent the day conditions arrive is worth more than a week of following up later.
Where to start
Do three things before any approval exists, because all three are free and all three are common causes of late-stage delay. Pull your certificate of good standing. Run a lien search on the entity and start terminations on anything satisfied but still filed. Confirm your operating agreement or bylaws clearly authorize the entity to borrow and identify who signs.
Then, when conditions arrive, work the list in the order of who is slowest rather than who is easiest. If you are earlier in the process than that, the useful first step is establishing what the money is for and what secures it, collateral type determines most of the closing list you will eventually be working.
Qualified Commercial Underwriting Desk
Credit and capital markets
The Qualified Commercial underwriting desk reviews commercial real estate, dealer and Main Street files daily. The Academy is written from that work (how files are actually read, priced and declined) rather than from a rate sheet.
Educational content only. Nothing here is a commitment to lend, an offer of credit, or tax, legal or accounting advice. Program terms, timelines and thresholds vary by lender, file and market conditions, and any figures shown are illustrative.