Business Acquisition Checklist
Before buying a business, review our small business acquisition guide
Here is a comprehensive guide to the reasonable steps taken during the process of buying a business.
Business Acquisition Due Diligence Checklist
- Tax income and sales tax returns (federal, state, local, foreign): last 3-5 years
- Interim income statement: year-to-date and comparison to previous year
- Interim balance sheet: year-to-date and comparison to previous year
- Accounts receivable
- Accounts payable
- Business valuation
- Inventory – value, age, condition, etc. Is the inventory sellable or leftover from what the current owner wasn’t able to sell?
- List of furniture, fixtures, and equipment
- Machinery and equipment lease and purchase agreements
- Vehicle registrations and titles
- U.C.C. Filings
- Lease agreement: How long is the lease? Are there restrictions that might prevent you from expanding products or services? Does the tenant or the landlord maintain the premises?
- Environmental studies
- Previous appraisals
- Location and market research
- Security systems in place and past burglary reports
Product and Service Information
- A list of all products or services currently offered
- A list of all products or services under development with summary of relevant data
- Sales records – can be helpful to evaluate the sales breakdown by product, service, client, and method of payment
- For motels and hotels: occupancy rate, average daily room rate (ADR), revenue per available room. (RevPAR), STR or STaR report. Read our article on how to buy a motel or small hotel here
- Summary of all complaints, warranty claims, and returns
- Product or service market research reports
- Business reputation research: review search engine results, Yelp, Facebook, Better Business Bureau, etc.
A pre-qualification is a great way to get a headstart on your application and will help in your negotiations. There is no credit check required and you’ll receive your pre-qualification letter and borrowing estimate within 24 hours.
Markets and Competitors
- Customer profile
- Existing supply or service agreements
- Company’s credit and purchasing policies
- Schedule of unfilled orders
- Market research reports
- Previous and current advertising and marketing efforts
- List of competitors
- List of employees with name, position, start date, salary, contracts, and benefits
- Copies of all stock option and stock purchase plans
- Worker’s compensation claims history
- Unemployment insurance claims history
- Franchise Agreement
- Franchise Disclosure Document
- Distribution agreements
- Supplier agreements
- Sales contracts
- Vendor contracts
- Employee agreements
- Subcontractor agreements
- Nondisclosure or noncompete agreements
- Security agreements, mortgages, and collateral pledges
- Any other legally binding agreements
- Details of litigation threatened, pending, or taken
- Inspection reports such as building and health inspections
- Licenses and permits – liquor license, lottery license, etc.
- Insurance – What is the insurance coverage? What claims have been made in the past?
Organization and Good Standing
- Articles of Incorporation and Bylaws
- Organizational chart
- List of shareholders and number of shares held by each
- A Certificate of Good Standing
- A list of all states where the Company is authorized to do business and annual reports
- Fictitious Business Name Statement
HOW DO I GET STARTED?
The best online SBA loan platform is YourEdge™ by YourSBA.com:
- Get prequalified to buy a business within 24 hours
- Start here with YourEdge™
- Find out how much you may qualify for using our SBA Loan Calculator tools here.
- Business acquisition loans from $350,000 to over $5 million.
- 5x success rate of your bank
- No fees
- No credit check / No hard credit pull
- No bank runaround
- Online, streamlined application accepted by all of the most aggressive SBA lenders for competitive interest rates and a 95% success rate.