Business Credit Due Diligence

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Tools - Typical Due Diligence Request List: Business Loans

    1. Industry
      1. Industry magazines, studies, etc. describing the market.
      2. Recent analysis from accountants, investment bankers, consultants, and other third party information on the industry and company.
      3. Detailed list of all competitors and estimated market share.

 

    1. Corporate Affairs (New Corporation)
      1. Certificate of Incorporation
        1. Bylaws
        2. Long form good standing and tax certificates in the state of Incorporation
        3. List of jurisdiction the company is qualified to do business or is otherwise operating
        4. Form of Stock certificates
      2. Minutes
        1. Board of Directors meetings
        2. Shareholders meeting if any
        3. Special Committee meetings
      3. Financing
        1. All documents and agreement evidencing borrowings, whether secured of unsecured, including loan and credit agreements, promissory notes, and other evidences of indebtedness and all guarantees.
        2. Bank letters or agreement comfirming lines of credit, including covenants.
        3. Loans and guarantees of third parties obligations.
        4. Credit agreements.
        5. Correspondence with lenders, including compliance reports.
      4. Lease agreements
        1. Financing leases and sale lease back agreement
        2. Conditional sale agreements
        3. Equipment leases
        4. Correspondence with lessors and landlords

 

    1. Capital Stock
      1. Securities authorized and outstanding
      2. Covenants of preferred stock
      3. Agreement relating to the purchase, sale or issuance of securities
      4. Shareholder list indicating ownership

 

    1. Research and Development
      1. All patents, trademarks copyrights and other tangible assets
      2. R&D costs last 5 years and projection next 3 years

 

    1. Personnel and Labor
      1. Employment contracts
      2. Consulting contracts
      3. Union contracts
      4. Loans and guarantee of personnel , directors, officers
      5. Employee benefits, vacation pay and severance polices
      6. Employee stock option plans
      7. List of stock options, vesting date and termination date
      8. Employee size, turnover, absentee history
      9. Employee adverse actions
      10. Personnel manuals

 

    1. ERISA
      1. Pension and profit sharing plans
      2. Deferred compensation plans
      3. Other employee benefit plans

 

    1. Management
      1. Salaries and bonuses
      2. Other benefits

 

    1. Organizational Chart
      1. Management structure
      2. Officers and directors list

 

    1. Legal
      1. All litigation past 5 years and present and pending
      2. Regulatory compliance
      3. Environmental concerns, proceedings
      4. Citations and notices from governmental agencies
      5. Pending investigation
      6. Government permits
      7. Reports to Governmental agencies

 

    1. Real Property
      1. Deeds
      2. Lease and subleases
      3. Zoning variances
      4. Easements, restrictions and other encumbrances
      5. Recent property surveys
      6. Title Insurance policies
      7. Legal description
      8. Recent appraisal

 

    1. Sales and Marketing
      1. Sales organization chart
      2. Sales and marketing materials
      3. Sales commission plan
      4. Sales allowances and returns
      5. Warranty and consignment policies

 

    1. Other Agreements
      1. Marketing agreements, including sales agents, dealers, and distributor agreements
      2. OEM pricing agreements
      3. Governmental contracts
      4. Purchase agreements
      5. Joint venture and partnership agreements
      6. License agreements
      7. Franchise agreements
      8. Service agreements
      9. Equipment service agreements
      10. Construction agreements
      11. Advertising agreements
      12. Acquisition and disposition of companies and assets
      13. Confidentiality and non-disclosure agreements
      14. Sample forms of purchase and order invoices
      15. Indemnification agreements
      16. Intercompany documents, subsidiary agreements
      17. Insider agreements
      18. Form of product warranties
      19. Other agreements material to the business of the Company

 

    1. Suppliers and Customers
      1. List all major suppliers and customers and their annual dollar amounts purchased
      2. Purchasing practices and accountability

 

    1. Insurance
      1. D&O
      2. Premises
      3. Workers compensation
      4. Property
      5. General Liability
      6. Business interruption
      7. Product Liability
      8. Key man
      9. Automobile
      10. Equipment
      11. Loss experience past 5 years on all insurance

 

    1. Financial Information
      1. Balance sheets and income statements past 5 years
      2. Quarterly balance sheets and income statement past 2 years
      3. Budget for current fiscal year
      4. A chart of accounts
      5. Pricing policies
      6. Accounts receivable analysis and aging
      7. Accounts payable analysis and aging, including trail balances
      8. Most recent business plan
      9. Copies of past 3 years business plan
      10. Copies of changes in accounting policies
      11. Copies of independent management letter comments
      12. Correspondence with independent accountants
      13. Reports from outside consultants on the company's business and financial condition
      14. Reports and material prepared for the Board of Directors past 5 years
      15. A summary of extraordinary and non-recurring expenses for the past 5 years
      16. A summary of bad debt experience and management explanation for the past 5 years
      17. A summary of significant acquisition or disposal of property and equipment the past 3 years
      18. Appraisal of equipment and fixed assets or tax assessment valuations
      19. List all material contracts in process including total price cost incurred to date estimated cost to finish and estimated profit
      20. List open purchase commitments
      21. Analysis if the following:
        1. Other income (expense)
        2. Prepaid expenses
        3. Deferred charges
        4. Other assets
        5. Accrued liabilities
        6. Other liabilities
      22. Analysis of the following:
        1. Warranty
        2. R&D
        3. Advertising and Promotion
        4. Bonus and profit sharing
        5. Pension benefits
        6. Repairs and maintenance

 

    1. Tax Matters
      1. Federal, State, and local tax returns last 3 years
      2. IRS audits

 

    1. Projections
      1. Sales
      2. Cash flow
      3. Capital expenditures
      4. Operating expenses

 

    1. Miscellaneous
      1. Press releases and other third party clippings
      2. Company newsletters
      3. List of employees who have left the company the past 3 years
      4. Work safety reports

 

  1. All other documents or information which, in your judgment, are significant with respect to the business of the company or which should be considered and reviewed in making disclosures regarding the business and financial condition of the company to prospective investors.
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