Stipulations (Stips)

Stipulations, or "stips," are the documents and conditions a funder requires before it will release money. The term is common in small business lending and merchant cash advance (MCA) funding. Other lenders may call them conditions or closing conditions.

A stip can be a document, or a fact the lender must confirm. Common examples include:

• Recent business bank statements
• A copy of the owner's driver's license
• A voided business check, to set up payments
• Proof of ownership, such as articles of organization
• A lease or a letter from the landlord
• Tax returns or financial statements for larger deals
• Payoff letters for any existing advances being paid off
• Proof of insurance or a signed personal guarantee

Some stips come before approval, because the underwriter needs them to decide. Others come after approval but before funding. These are often called "prior to funding" conditions. The approval itself may say the deal is approved "subject to" a list of stips.

Why it matters for lenders

Stips protect the lender. They confirm that the borrower is who they say they are, that the business is real, and that the facts in the loan application hold up. Skipping a stip to speed up a deal is a common way fraud gets through.

Stips also drive speed. In fast-moving markets like MCA, a broker often sends the same deal to several funders. The funder that clears its stips first often wins. Each day a file waits on a missing document is a day the borrower might take another offer.

The status of each stip should be clear at a glance: requested, received or cleared. When stips are tracked in email, staff ask borrowers twice for the same item, and nobody can say which deals are ready to fund.

How it works in practice

An MCA funder approves a $50,000 advance, subject to four stips: a voided check, the owner's ID, a landlord contact and the latest month's bank statement. The deal record lists each stip with its status and the person responsible.

The broker uploads the ID and the voided check the same afternoon, and the processor clears both. The bank statement arrives the next day. During bank statement analysis, the underwriter spots a new daily debit from another funder, which is a sign of stacking. She adds a new stip: a statement from the other funder showing the remaining balance.

Once every stip is cleared, the deal moves to funding. A manager can sort the whole pipeline by stips outstanding. That shows at once which deals are close to funding and which have stalled.