What Is a Condition Precedent?
A condition precedent (sometimes shortened to “CPs”) is a set of obligations or stipulations tied to an approval that need to be completed before a contract becomes binding.
In MCA and small business lending, these conditions can include providing updated bank statements, clearing outstanding debts, confirming identity documents, or delivering signed agreements.
They typically appear during the approval and pre-funding stages. Operators use them as a checklist to confirm readiness and to ensure compliance with internal policies before disbursing funds.
How Does a Condition Precedent Work?
Condition precedents operate as a gating mechanism in the deal lifecycle.
- Approval stage: A funder issues a conditional approval, outlining what must be satisfied before funds are released.
- Broker communication: The conditions are shared with brokers or applicants to collect the required items.
- Verification: Funders or systems confirm that the items are provided and valid.
- Funding: Once all conditions precedent are met, the deal moves forward to disbursement.
In Heron, condition precedents are flagged and tracked through automation.
- Parsing approvals: CPs are captured from funder decision emails and recorded as structured fields.
- Stip tracking: Each condition is logged alongside the deal, making it visible in CRM records.
- Automation loop: Missing-info requests can be triggered automatically to collect outstanding items.
- Next action: Deals only advance to underwriting-ready or funding status once every condition precedent has been satisfied.
This makes sure no deal slips through with incomplete requirements.
Why Is a Condition Precedent Important?
For brokers and funders, a condition precedent is important because it prevents premature funding. Without them, deals might close with missing documents, undisclosed risks, or compliance gaps.
Heron improves this process by automating the capture and tracking of conditions precedent. This reduces delays, improves accuracy, and helps teams maintain control over pre-funding requirements.
Common Use Cases
Condition precedents are applied in all types of structured lending workflows.
- Confirming updated bank statements are submitted before release.
- Requiring signed personal guarantees before approval is finalized.
- Collecting proof of insurance or tax filings prior to funding.
- Flagging identity mismatches that must be resolved before disbursement.
- Preventing accidental funding of incomplete or risky deals.
FAQs About Condition Precedent
How does Heron handle condition precedents?
Heron parses condition precedents directly from decision emails, logs them as structured fields, and tracks them until every requirement is cleared.
Why are condition precedents valuable for MCA brokers and funders?
They prevent premature funding and reduce risk by making sure all approvals are contingent on specific requirements being met.
What outputs should teams expect from tracking condition precedents?
Teams can expect CRM records with clearly logged conditions, automated requests for missing items, and funding workflows that only advance once all requirements are met.