In what order should documentation be submitted during the loan approval process?

The correct order of documentation during the loan approval process begins with the loan application, followed by the term sheet, the commitment letter, and finally the loan agreement.

Initiating the process with the loan application is crucial because it provides the lender with the necessary details about the borrower’s financial situation, business purpose, and the requested loan amount. Once the lender evaluates the application, a term sheet is drafted, outlining the key terms and conditions of the proposed loan. This document serves as a basis for further negotiation and understanding of the loan's essential elements, such as interest rates, repayment schedules, and other obligations.

After both parties agree on the terms outlined in the term sheet, a commitment letter is issued. This letter signifies that the lender is ready to provide the loan under the agreed-upon terms, subject to certain conditions that need to be fulfilled before final approval. Lastly, the loan agreement is executed, which is the binding contract that documents all terms and conditions finalized between the lender and the borrower.

Understanding this sequential process is essential for ensuring proper compliance and operational efficiency during the loan approval journey.