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Approval
Also called offer, pre-approval, soft approval.
A funder's stated willingness to fund on named terms, which ranges from an automated indication to a signed commitment and is conditional at every stage until the money moves.
Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.
What it means
The word covers several very different states. A soft or system approval is a model output on the data submitted, valid only if the data holds up. An underwriter approval carries a decision-maker behind it but still sits behind conditions. A term sheet or commitment letter is a written offer with defined terms and an expiry. Only funding is funding.
Between approval and funding sit the stipulations, universally called stips: bank statements for additional months, read-only bank verification, a voided check, photo identification, proof of ownership, a landlord or mortgage statement, a signed application, sometimes tax returns or a merchant processing statement. Failing a stip can reduce an offer or withdraw it.
Terms move at this stage too. An approval for a given amount at a given factor and term can come back shorter, smaller, or with a different position, once statements are re-read or another funder's UCC filing appears. A funder can also withdraw before funding under the conditions in its own paperwork, and most contracts allow it to decline to fund even after signature.
For a business planning around the money, the relevant date is the wire, not the approval email.
Where this one catches people
Brokers say approved when they mean one funder has produced an indicative offer, and they will often present several such offers as competing approvals. Treat an approval as a quote with conditions until you have the full contract, the total payback, the payment amount and frequency, the net wire figure and the fees in writing.
Where you will meet this term
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Approval — common questions
What does approval mean?
A funder's stated willingness to fund on named terms, which ranges from an automated indication to a signed commitment and is conditional at every stage until the money moves.
Where does approval catch people out?
Brokers say approved when they mean one funder has produced an indicative offer, and they will often present several such offers as competing approvals. Treat an approval as a quote with conditions until you have the full contract, the total payback, the payment amount and frequency, the net wire figure and the fees in writing.
Is approval the same as an interest rate?
Approval is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.
Which products does approval apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit, SBA Loan, Equipment Financing.
Is there a worked example of approval?
Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.
What else should I read alongside approval?
Automated underwriting, Commitment letter, Credit box, Credit committee, Stips.
Has this definition been checked?
Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.
Is this legal advice?
No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.
Can I suggest a term?
Yes — [email protected]. The glossary grows from what people are actually shown in contracts.