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Pre-approval
Also called prequalification, soft approval, indicative offer, conditional approval.
A non-binding indication of what a funder might do based on limited information, subject to full underwriting, verification and a final credit decision.
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
It is generated from whatever the funder has at that moment: an application, sometimes a soft credit pull, sometimes three months of bank statements read quickly by a model. No verification has happened. No stipulations have been cleared. No committee, if there is one, has met.
Between pre-approval and contract, several things routinely move the number. Bank statements reveal existing positions the application did not disclose. Deposit totals adjust downwards once transfers are stripped out. A UCC search shows filings. Landlord, processor or supplier verification fails. The industry code turns out to be restricted. Amounts shrink and terms tighten far more often than the reverse.
Nothing in a pre-approval obliges the funder to fund, and the documents usually say so explicitly in language the covering email does not repeat.
Where this one catches people
Pre-approved means underwriting has not happened yet - it is a marketing state, not a credit state. Businesses that sign supplier contracts, order equipment or plan payroll around a pre-approval are relying on a document that has been drafted specifically to create no obligation. Wait for the funding contract and the net funding figure.
Where you will meet this term
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Pre-approval — common questions
What does pre-approval mean?
A non-binding indication of what a funder might do based on limited information, subject to full underwriting, verification and a final credit decision.
Where does pre-approval catch people out?
Pre-approved means underwriting has not happened yet - it is a marketing state, not a credit state. Businesses that sign supplier contracts, order equipment or plan payroll around a pre-approval are relying on a document that has been drafted specifically to create no obligation. Wait for the funding contract and the net funding figure.
Is pre-approval the same as an interest rate?
Pre-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 pre-approval apply to?
Merchant Cash Advance, Working Capital, Term Loan, Business Line of Credit.
Is there a worked example of pre-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 pre-approval?
Monthly deposit average, Net funding, Qualification criteria, Stips, Term sheet.
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.