This post is part four of a four part series on the kinds of documentation a lender will request of you when you seek a business loan.
If you have read all four sections of this series and have assembled your documentation ready to submit to the lender, you should go one step further and “assume” that the loan will be approved. Providing the corporate documents isn’t necessarily required at the loan request stage, but having them all together and part of the loan package makes the entire process easier for the lender to handle. It gives them the confidence that will be easy to deal with in the loan request process. Loan officers love easy loans to do and when a loan package is dropped in their lap complete, it reduces their work and makes it easier to take care of you, the borrower.
These last items I will discuss are various corporate documents including:
Company articles of incorporation.
State issued corporate charter.
State issued certificate of good standing
Assumed name certificates.
Articles of Incorporation: this is pretty self explanatory but make sure and clean up any changes to the company ownership or registered agent at the state Secretary of State’s office if there have been changes in officers, registered agents, or owners.
Corporate Bylaws: Many businesses incorporate or set up an LLC and somehow forget to put together their bylaws. An alternative to bylaws is an organizational agreement which essentially covers the same type of corporate governance issues that bylaws do. While it is less critical to have an organizational agreement for a corporation or sole owner of an LLC, you should still have one. It is absolutely necessary when there are more than one shareholder as this agreement outlines how the business will be operated and will vest authority in the corporate officers to bind the company to contracts, loans and such.
Corporate Minutes: Many states require that a corporation have at least an annual board of directors meeting. The corporation’s secretary keeps notes that are signed off by the president and often other directors who are present at the meetings. As with the organizational agreement, keeping minutes is less critical when the corporation or LLC is owned by a sole shareholder. If there are two or more shareholders there should be at least an annual meeting to present items requiring board of director’s approval. Lenders like to see businesses take care of these little details as they believe a business that does so is a careful, thoughtfully managed business.
Corporate Charter and Certificate of Good Standing: This is a single page document that grants the corporation or LLC the authority to do business in the state. A lender wants to insure that your legal entity has corporate standing. A Certificate of Good Standing is a document that shows your company is current on all its state mandated reporting and that all franchise taxes have been paid. Typically, one can go to the state Secretary of State’s website and print a Certificate of Good Standing. Lenders cannot loan money to a company that is not in good standing.
Assumed Name Certificate: Often a corporation will do business under a name other than the corporation name. This requires the corporation to file an assumed name certificate for each name it uses to conduct business with the local county as well as the Secretary of State’s office. These certificates are inexpensive and easy to file, but the value they provide the borrower and the lender is that they insure that no other business or entity can do business under the same name.
You may contact Sam directly at: email@example.com
or follow him on Twitter: SMBfinance
EXTRA: If you have questions for Sam regarding business financing, the credit market, and similar issues, please send an e-mail. Your questions will be recorded and Sam will answer the best ones in his Ask the Expert podcast show.