A Corporate Resolution to Borrow is essential for corporations when securing loans or credit. It demonstrates that the loan has been formally approved by the company’s board of directors or shareholders and authorizes designated officers, such as the CEO or CFO, to sign loan documents. This helps lenders confirm the legitimacy of the borrowing authority and reduces their risk.
The process typically begins with identifying the need for funds, followed by board discussions and a formal vote to approve borrowing. After approval, a written resolution is drafted detailing the authorized persons, maximum loan amount, loan type, and sometimes the purpose of the borrowing. The resolution is then signed by the corporate secretary or an authorized officer who certifies its validity. This document is presented to lenders during the loan application process.
A well-prepared Corporate Resolution to Borrow usually contains the company’s legal name, incorporation details, a clear statement of authorization, names of authorized signatories, borrowing limits, credit type, and certification signatures. It prevents unauthorized borrowing, protects the company legally, and ensures compliance with internal bylaws.
While primarily required by corporations like C-Corps and S-Corps, LLCs may also need similar resolutions called Member or Manager Resolutions, depending on their operating agreements and lender requirements.
Common mistakes to avoid include using outdated resolutions, vague language, incorrect signatories, ignoring bylaws, missing proper certification, or lacking a resolution altogether, all of which can delay or derail loan approvals.
For more detailed guidance on corporate governance and resolutions, see the related Board Resolution and Loan Closing Checklist articles.
Additional authority and examples can be found on the IRS website and legal resources such as LegalZoom’s guide on How to Create a Corporate Resolution.
References:
- Investopedia, Board Resolution: https://www.investopedia.com/terms/b/boardresolution.asp
- LegalZoom, How to Create a Corporate Resolution: https://www.legalzoom.com/articles/how-to-create-a-corporate-resolution
- IRS Business Structures: https://www.irs.gov/businesses/small-businesses-self-employed/business-structures