Has your company opened a bank account or borrowed money recently?  If not, you may be in for a rude surprise if you don’t know where your Articles of Organization/Formation and Operating Agreement or Bylaws are or what they say.

Banks and Lenders are the TSA of corporate identification.  If you need to open a new account or borrow money, there are several corporate documents you will need to provide. Whether due to a new entity, a merger, an acquisition, moving, or even theft or fraud, there are many financial events that will require complete and current corporate documentation.

When opening a new business account or borrowing money, banks generally require several key documents to verify your company’s legal status and identity. Many of you may have had to supply these documents to your bank for the first time when your bank was acquired and the new bank required these documents to be on file for everyone.

The Documents You’ll Need to Borrow Money

Here are the documents your lender will want to see if you wish to borrow money:

• Articles of Organization (for LLCs) or Articles of Incorporation (for corporations). This document proves the entity was officially formed with the state and legally exists.
• Operating Agreement or Bylaws. This is the most important document as explained below. Think of it as your entity’s rulebook.
• Government-issued photo ID for all owners and authorized signers.
• Business license.
• Certificate of Good Standing from your state. This confirms your company is active and compliant with state filing requirements. If an entity is not in good standing, loan documents may not be enforceable.
• Employer Identification Number (EIN) from the IRS.  Shows the IRS knows about you.
• Authorizing Resolutions (usually provided by the bank or lender in a format acceptable to them).  These written approvals show your company has authorized the loan and approved a specific person to sign the loan documents.
• Foreign Registration (if applicable). If your company operates outside its state of formation, lenders may require proof it is properly registered as a foreign entity in that state.

Providing these documents helps the bank confirm your business’s legitimacy and ensures that the right individuals are authorized to access and manage the account. The banks are required to drill down to the individuals that own and manage the business and get behind the so-called shell corporations.

When you apply for a loan, the lender isn’t just reviewing your project and financial statements. They require proof that your company legally exists, is properly governed, and has the authority to borrow money. Lenders will do an even deeper dive into your Operating Agreement/Bylaws, which is why this document should be kept available and up to date.

Why your operating agreement matters to a lender.

Lenders rely on your Operating Agreement/Bylaws to confirm:

• Your company is a real, properly governed legal entity
• The correct person has authority to sign loan documents
• Nothing in the entity’s internal rules conflicts with the loan terms
• Documents ownership percentages and capital contributions
• Defines whether an LLC is member-managed or manager-managed
• Sets rules for profit and loss allocations and distributions
• Establishes voting rights and decision-making thresholds
• Helps preserve your entity’s liability protection

Without an Operating Agreement/Bylaws, your company is governed by default state law, which creates uncertainty. For this reason, lenders generally will not lend to your company without a satisfactory Operating Agreement/Bylaws. Make sure yours is good to go

Billboard Loans provides loans of $1 million and less to out of home companies.  No loan is too small.   To learn more about how Billboard Loans can help you email kenaltena@billboardloans.com or call Ken at 206-636-8478.

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