Entity Documents and Borrowing Authority: A Commercial Loan Closing Guide

01

Why Entity Authority Matters Before Closing

A loan commitment may approve an economic transaction, but the closing file still must establish who is borrowing, pledging collateral, guaranteeing obligations, and authorizing each act. The lender and its counsel may need evidence that the entities were validly formed, remain active, and have power under their governing documents and applicable law to enter the transaction. A signature from the wrong person—or on behalf of the wrong entity—can create enforceability and lien problems. Borrowers should surface authority questions before final documents are drafted, not during the wiring window.

02

Map the Borrower, Owners, Guarantors, and Collateral Parties

Create an organization chart showing the exact legal name, jurisdiction, entity type, ownership percentage, tax identification relationship, and role of every relevant company, trust, partnership, individual, and special-purpose property owner. Identify which entity receives proceeds, owns each pledged asset, operates the business, leases space to a related company, and provides a guarantee. Reconcile the chart to tax returns, financial statements, purchase agreements, leases, titles, and the lender application. A trade name or DBA should never be substituted for the legal borrower without a clear explanation.

• Requested amount and use of proceeds
• Historical and current financial statements
• Complete debt and ownership schedules
• Collateral and transaction documentation

03

Assemble the Complete Governing-Document Set

For a corporation, the package may include articles or a certificate of incorporation, bylaws, amendments, shareholder agreements, and prior resolutions. For an LLC, it may include the formation filing, operating agreement, amendments, membership schedules, and written consents. Partnerships, trusts, nonprofits, and professional entities require their own governing records. Use executed documents and preserve the order in which amendments control. If the signed agreement cannot be found, do not recreate or backdate one; involve qualified counsel and disclose the gap so a lawful solution can be evaluated.

04

Confirm Good Standing, Names, and Required Qualifications

Compare the legal name character by character across formation records, tax filings, bank accounts, contracts, title, insurance, and the lender's documents. Determine whether current certificates of existence or good standing, assumed-name filings, or foreign qualifications are required in states where the entity owns property or conducts business. Resolve delinquent annual reports, franchise taxes, administrative dissolution, or address inconsistencies early. A certificate is a dated state record, not proof that every contract, license, or tax obligation is current.

05

Document Ownership and Beneficial-Ownership Information

Provide a current capitalization or membership schedule that explains voting rights, economic interests, transfers, options, convertible instruments, and any ownership held through another entity or trust. Trace indirect owners through the organization chart and reconcile the result with prior applications and tax records. Lenders may request identifying information and certifications under their customer-identification, beneficial-ownership, sanctions, or program procedures. The borrower should use the lender's current instructions and secure channel rather than assuming that an old form satisfies the present request.

06

Prepare Resolutions, Consents, and Signing Authority

The governing documents determine whether managers, members, directors, shareholders, partners, trustees, or another body must approve borrowing, collateral pledges, guarantees, property transfers, or related-party arrangements. Closing counsel may prepare resolutions or consents that identify the transaction and authorized signers. Confirm titles, approval thresholds, quorum, conflicts, and any limits on debt or guarantees. Do not sign blank resolutions or rely on an officer title alone when the operating agreement or bylaws allocate authority differently.

07

Address Special-Purpose and Related Entities

Commercial real estate and acquisition structures often separate the property owner, operating company, holding company, and guarantors. Related-party leases, upstream or cross-stream guarantees, intercompany loans, and equity contributions can require separate approvals and documentation. A newly formed entity may also need a bank account, tax identification number, insurance, licenses, and capital contribution evidence before funds can move. Explain the business purpose and cash flow between entities so the legal structure matches the underwriting narrative and sources-and-uses statement.

08

Run a Final Closing-Control Review

Maintain one dated index listing each entity, required document, execution status, amendment, signer, certificate expiration, and unresolved legal question. Compare final names and capacities across the note, security agreement, mortgage or deed of trust, guarantees, UCC filings, insurance, title documents, and wiring instructions. Route legal conclusions to the borrower's attorney and use verified delivery channels for sensitive records. PFCS can help organize the financing package and coordinate it with third-party capital sources, but lenders and counsel determine authority, documentation, approval, legal sufficiency, pricing, and final terms.