What length is appropriate?

Keep the letter concise and factual; one to two pages is typical. Long essays invite extra review, while too-short notes may leave key questions unanswered. Focus on dates, amounts, causes, and attached exhibits.

Do I need to include exhibits?

Yes when available. Attach labeled supporting documents (bank statements, invoices, contracts). Reference each exhibit in the body so reviewers can verify the facts without requesting additional files.

Who should sign the letter?

An authorized representative with knowledge of the facts should sign. Provide printed name, title, and contact information. If signer authority is uncertain, include a corporate resolution or power of attorney.

Is notarization required?

Not usually required for many business explanations, but the recipient may request notarization or an affidavit in high-risk cases. Check recipient instructions and state rules for notarization or witness needs.

Can I submit electronically?

Yes. Use an eSignature solution that meets ESIGN and UETA requirements and preserves an audit trail. For healthcare data, ensure HIPAA protections and a BAA when needed.

What if facts change after submission?

Submit an updated letter clearly dated and labeled as a revision. Retain prior versions for audit purposes and note the reason for amendment to preserve a clear record.

Electronic Signature
Templates
Miscellaneous
Business Letters of Explanation

Business Letters of Explanation

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Business Letter of Explanation and Agreement

Company Name: Recipient Name:

WHEREAS

WHEREAS, Company Name is engaged in the business of providing commercial services and has requested that Recipient consider and rely upon the explanations set forth in this Letter in connection with business operations, transactions, or underwriting matters; and

WHEREAS, Recipient requires a written statement clarifying specific factual circumstances, operational timelines, or financial items; and

WHEREAS, Company Name and Recipient agree that the statements and attachments provided in this Letter are intended to explain the matters described below and to form part of the parties' understanding under the terms set forth in this document.

Letter of Explanation

Date of this Letter:

Subject Detailed Explanation

The foregoing explanation is provided to clarify material events described as follows. All factual statements are true and accurate to the best of Company's knowledge, and exhibits or documents listed in the Supporting Documents section are attached where applicable.

Scope of Work

Scope Description

Payment Terms

Contract Amount Payment Schedule Late Payment Fee

If any payment is not received within days of its due date, a late fee shall apply of % per month on the overdue balance (or the maximum amount permitted by law), plus costs of collection.

Term and Termination

Term Start Date: Term End Date:

Notice Period for Termination

Either party may terminate this Agreement for material breach by the other party if such breach is not cured within the notice period set forth above. Termination shall be without prejudice to any rights or remedies that have accrued prior to termination.

Confidentiality

For purposes of this Letter, "Confidential Information" means non-public business, financial, operational or technical information disclosed by one party to the other, whether in writing, orally, or by inspection. Recipient shall hold Confidential Information in strict confidence and shall not disclose it to any third party except to the extent required by law or to professional advisors bound by confidentiality. Obligations of confidentiality shall survive termination for a period of three (3) years, unless otherwise agreed in writing.

Governing Law

This Letter shall be governed by and construed in accordance with the laws of the State of , without regard to its choice-of-law rules.

Entire Agreement

This Letter, together with any attachments and supporting documents listed below, constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous agreements, understandings, negotiations and discussions, whether oral or written. Any amendment to this Letter must be made in writing and signed by authorized representatives of both parties.

Supporting Documents and Representations

List of Supporting Documents Attached

Company represents and warrants that all statements made in this Letter are true, accurate and complete to the best of its knowledge and belief, and that no material facts have been omitted that would make the statements misleading.

Contact Information

Company Address Primary Contact Name Contact Title Contact Phone Contact Email

By signing below, each signatory certifies that they are authorized to sign on behalf of their respective party, that the information contained herein is true and complete to the best of their knowledge, and that they understand and agree to the terms set forth in this Letter.

Company Printed Name:

By:

Date:

Recipient Printed Name:

By:

Date:

What a Business Letter of Explanation Is and When It’s Used

A Business Letter of Explanation is a concise, written statement used to clarify atypical, ambiguous, or exceptional items in a commercial transaction or application. Common uses include explaining gaps in financial statements, unusual account activity, missing documentation, or deviations from standard underwriting criteria. The letter is typically addressed to a reviewer, lender, insurer, or regulator and provides factual background, relevant dates, and supporting references. It should be signed by an authorized representative, dated, and accompanied by any corroborating documents to substantiate the explanation and reduce follow-up questions during review.

Why a Clear Letter of Explanation Matters

A clear Business Letter of Explanation reduces processing delays, limits follow-up requests, and creates a record of the applicant’s position. It helps decision-makers assess risk quickly and ensures that unusual items are judged on documented facts rather than assumptions.

Who Prepares and Receives These Letters

The letter is usually prepared by a business owner, CFO, controller, broker, or authorized agent and submitted to an external reviewer such as a lender, insurer, tax authority, or regulatory examiner.

Lenders and underwriters reviewing loan applications or credit exceptions.
Accountants and auditors documenting unusual transactions during a review.
Insurance adjusters or brokers clarifying coverage or claims circumstances.

Use a Business Letter of Explanation when a short, factual narrative and supporting documentation will clarify an exception and support a timely decision by the recipient.

Step-by-Step: Preparing a Business Letter of Explanation

Follow a consistent sequence to create a clear, defensible explanation that reviewers can accept without repeated requests.

01

Gather Documents: Collect bank statements, invoices, contracts, or other evidence supporting the facts you will state.
02

Draft Narrative: Write a short factual statement with dates, amounts, causes, and who was involved.
03

Attach Proof: Append labeled exhibits and reference them in the body (Exhibit A, Exhibit B).
04

Authorize and Sign: Ensure an authorized representative signs and dates the letter; include contact information.

Typical Submission and Review Flow

Understanding the common routing steps helps you provide the right level of detail and documentation at each stage.

Prepare Package: Compile the letter and supporting exhibits into a single PDF or packet.
Deliver to Reviewer: Send via secure email, e-submission portal, or an eSignature platform with audit trail.
Reviewer Assessment: Staff reviews the facts and attached documents for completeness and credibility.
Decision and Record: Reviewer records the outcome; retain the final packet in the official file.

Essential Security and Compliance Considerations

Encryption: TLS 1.2/1.3 in transit; AES-256 at rest.

Certifications: SOC 2 Type II and ISO 27001 available.

HIPAA: BAA available for protected health information.

ESIGN / UETA: Supports electronic signature legal frameworks.

Audit Trail: Detailed timestamps, IP addresses, and action logs.

Access Controls: Role-based access and multi-factor authentication.

Risks and Potential Penalties for Incorrect Letters

Tax Filing Penalties: 1099 errors can trigger $60–$330 per form penalties under IRC §6721.

Intentional Misstatement: Intentional disregard penalties exceed $660 per form with no cap.

I-9 Violations: I-9 paperwork errors may result in $281–$2,789 per violation.

Regulatory Risk: Incomplete explanations can prompt audits or supervisory action.

Contract Disputes: Inaccurate factual statements may be used in litigation.

Operational Delays: Missing or mismatched references cause processing delays and rescopes.

Configuring an eSubmission Workflow for Your Letter

Key settings make eSubmission reliable and admissible: choose authentication, field types, and retention options deliberately.

Field	Configuration
Authentication Method	Email link with optional SMS code for higher assurance
Signature Field	Sign, initial, and date fields; require all signers
Conditional Fields	Show attachments or extra text when certain answers are selected
Retention & Audit Trail	Enable full audit logs and PDF/A export for records

How a Business Letter of Explanation Differs from an Affidavit

These two documents can both explain facts, but they differ in formality, evidentiary weight, and authentication requirements.

Document Type	Business Letter of Explanation	Affidavit
Formality	informal written statement	formal sworn statement
Notarization	sometimes required	often required
Oath Required
Typical Use	clarify business or underwriting items	provide sworn factual testimony

eSignature Pricing and Feature Snapshot for Document Submission

This table summarizes starting prices and key feature differences among common eSignature providers to help determine fit for Business Letters of Explanation workflows.

	signNow	DocuSign	Adobe Sign	PandaDoc	HelloSign
Starting Price	$8/user/mo	$15/user/mo	$14/user/mo	$19/user/mo	$15/user/mo
Free Trial	7-day free trial	Varies by vendor	Varies by vendor	Varies by vendor	Varies by vendor
Bulk Send	Yes	Yes	Yes	Yes	Yes
Audit Trail	Yes	Yes	Yes	Yes	Yes
HIPAA Compliant	Yes	Yes	Yes	No	No
Envelope Cap	No envelope cap	100 envelopes/user/year	Varies	Varies	Varies

Common Questions When Preparing a Business Letter of Explanation

Answers to frequent practical questions about format, supporting documents, signing authority, and electronic submission.

Need help? Contact support

What length is appropriate?
Keep the letter concise and factual; one to two pages is typical. Long essays invite extra review, while too-short notes may leave key questions unanswered. Focus on dates, amounts, causes, and attached exhibits.
Do I need to include exhibits?
Yes when available. Attach labeled supporting documents (bank statements, invoices, contracts). Reference each exhibit in the body so reviewers can verify the facts without requesting additional files.
Who should sign the letter?
An authorized representative with knowledge of the facts should sign. Provide printed name, title, and contact information. If signer authority is uncertain, include a corporate resolution or power of attorney.
Is notarization required?
Not usually required for many business explanations, but the recipient may request notarization or an affidavit in high-risk cases. Check recipient instructions and state rules for notarization or witness needs.
Can I submit electronically?
Yes. Use an eSignature solution that meets ESIGN and UETA requirements and preserves an audit trail. For healthcare data, ensure HIPAA protections and a BAA when needed.
What if facts change after submission?
Submit an updated letter clearly dated and labeled as a revision. Retain prior versions for audit purposes and note the reason for amendment to preserve a clear record.

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