What are conditions precedent on a business loan?

2 min read

Before drawdownMust be met

DocumentsVerified

SecurityRegistered

You controlThe timeline

What conditions precedent are

The Latin means "conditions coming before" — specifically, before drawdown. They are the lender's checklist of things that must be true or done for the facility to complete. Until every one is satisfied, the approval stays conditional and no funds move. They appear in the facility letter.

The common ones

Verified final documents — signed agreement, ID and up-to-date accounts.
Security in place — a charge registered on secured deals.
Guarantees signed — a personal guarantee where required.
Authorisations evidenced — board or shareholder approval where your constitution demands it.

Clearing them without delay

Ask for the complete list the moment you receive conditional approval and work through it in parallel. Missing paperwork is the usual bottleneck, so the application checklist helps. Once satisfied, the facility becomes unconditional and moves to drawdown.

Frequently asked questions

What happens if I cannot meet a condition precedent?

The facility cannot draw down until it is met. Some conditions can be waived or amended by the lender; others, such as a required valuation, are fixed. Talk to your contact early if one looks difficult.

Are conditions precedent the same as covenants?

No. Conditions precedent must be met before drawdown; covenants are ongoing conditions you must keep to for the life of the loan. Both appear in the facility letter.