Condition precedent (CP)

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-01

// THE SHORT ANSWER

A condition precedent is something that must be done or delivered before the bank will let the borrower draw: signed security, a valuation, evidence of insurance, a director's certificate, sometimes an equity injection or a subordination deed. The list is the credit approval turned into a to-do list, and drawdown waits on its last item. A condition subsequent is the same idea with a deadline after drawdown, and missing it is a breach.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.