The Signing Authority Gap: An Uncomfortable Truth for Private Lenders

The borrower might not be who you think it is.

And the person signing your loan documents may not have authority to bind the entity.

That's not a technicality. It's litigation risk.

In private lending, deals move fast. A borrower submits an LLC operating agreement, someone signs at closing, and the loan funds. But here's the question most lenders never ask:

Does the person signing actually have the authority to bind the entity to this loan?

Operating agreements often contain specific provisions about who can sign on behalf of the LLC — and under what conditions. Some require unanimous member consent. Others designate a specific manager. Some even require board or member approval above a certain dollar threshold.

If the signer doesn't have proper authority, the loan documents may be voidable. That means your lien, your guaranty, your entire security package — could be challenged in court.

This isn't hypothetical. It happens. And when it does, lenders are often left holding an unenforceable note.

What EntityScan AI Does About It

EntityScan AI reads and analyzes the full operating agreement — not just the signature page. It identifies who has signing authority, whether there are dollar thresholds or consent requirements, and identifies signing-authority requirements and provides a suggested signature block.

It's the kind of review that used to take an attorney 30–60 minutes. EntityScan AI delivers a structured report in minutes — and does it consistently, every time.

The Bottom Line

If you're funding loans to entities without verifying signing authority, you're accepting a risk you may not even know you're taking. And in a market where defaults are rising and litigation is increasing, that's a gap you can't afford to ignore.

Update: When You Prefer Different Signers

September 13, 2026

The suggested signature block gives your team a starting point for who should sign. Sometimes, however, the lender or borrower prefers different signers. The included EntityScan Assistant can help explain the report's signing-authority findings and work through the steps and documents needed for that preference.

You can also ask about approval requirements or other authority-related risk factors identified in the report. The EntityScan Assistant provides help understanding those findings and addressing what remains, including when the report's Standard guidance assumes use of the suggested signature block.

See how the EntityScan Assistant helps with next steps →