Board Resolution for Borrowing Money from Bank
A board resolution for borrowing money from a bank is necessary for a company to go into debt.3 min read
A board resolution for borrowing money from a bank is necessary for a company to go into debt. If this resolution is not passed, the company will not be able to borrow money.
Before a company can go into debt by borrowing from a bank, the shareholders of the company must provide officers the authority to borrow. Generally, lenders will give borrowers a standard resolution that they will fill out and then sign. This resolution will indicate that a meeting of the company's board of directors has taken place and that there was a vote allowing the company to go into debt.
Information About Banking Resolutions
When a corporation's board of directors or a limited liability company's (LLC) members first meet to establish the organization, they will vote on a resolution related to the entity's banking details. There can be a wide range of resolutions discussed during this meeting, but the banking resolution is one of the most important.
After the initial discussion, adoption of the banking resolution can occur at a later meeting. The board of directors or LLC members also have the ability to alter the resolution if necessary. The purpose of drafting and adopting a banking resolution document is to outline the relationship LLC members or a corporation's directors will have with the company's banking needs. This document will also define responsibilities and privileges related to company banking. Once drafted, the banking document must receive authentication, meaning it should receive a corporate seal stamp and the corporate secretary's signature.
This document will list which people in the company may perform banking tasks, including:
- Signing checks.
- Borrowing money.
- Making important banking decisions.
In addition to outlining banking responsibilities, this document will describe the time and place where the board of directors adopted the resolution. When changes to a banking document are necessary, these alterations need approval and the signature of the corporate secretary and the LLC members or corporate directors. Although you should check the rules in your state, you will usually not need to file this resolution with either your state government or your registered agent.
Once the borrowing resolution has passed, the document goes to the bank providing the loan. The company should also keep a copy of the document internally. Generally, when a corporation or LLC needs to pass a resolution, the best option is using a template, which should be easy to fill out. If your company undergoes any major changes, and you have already filed a banking resolution with a bank, you should alert the bank about these changes.
There are certain circumstances in which a bank will request that you pass and submit a brand-new banking resolution. For instance, if there is a change in your board of directors or company officers, or if your company needs to renew its loan, you will likely need to adopt a new banking resolution and then file this new resolution with your bank.
Many companies prepare their banking resolution before requesting a loan from their bank. In some cases, however, banks prefer you to fill out a standard form provided by the bank instead of using your own baking resolution.
Every bank will have its own procedures for accepting banking resolutions. Ask your lender directly to make sure that you are filling out and filing this document correctly. When applying for your company loan, the bank will keep a copy of your banking resolution. The bank will also usually keep copies of your company's important documents, including your Certificate of Incorporation and company bylaws.
Board Resolution for a Bank Loan
A company's Board of Directors must pass a resolution if the company needs to apply for a bank loan. In addition to approving this loan, the resolution may also approve mortgaging the company property if the loan requires some form of collateral. Although there can be some minor differences in borrowing resolutions from company to company, they will generally follow a standard format, making it easier for your company's directors to draft and adopt this resolution.
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