Due Diligence Request List: The Documents Buyers Should Ask For

Executive Summary (TL;DR)

• A business due diligence checklist only works if it’s tied to verification (bank/POS/vendor/payroll), not just documents.
• Ask for a clean, labeled data room early—most deal delays come from missing basics (tax returns, lease terms, lien/payoff info).
• Treat customer concentration, inventory verification, and lease review as “go/no-go” gates before you spend heavily on advisors.
• If financing is involved (including SBA 7(a)), assume the bar for documentation and consistency will be higher.
• Who should act: buyers/investors who want to reduce re-trades, avoid hidden liabilities, and close faster with fewer surprises.

Table of Contents

• Due diligence: why it matters now
• What buyers/investors should do next
• Downloadable due diligence request list (copy/paste)
• Valuation lens: SDE, EBITDA, add-backs, working capital
• Deal process overview (NDA → LOI → diligence → close)
• Due diligence checklist table (documents + what to verify)
• Decision matrix: how deep to go (and when)
• Myth vs. Fact
• 30/60/90-day execution plan
• CTA: next steps on BizTrader

Due Diligence: Why It Matters Now

In small business acquisitions, “due diligence” isn’t a formality—it’s the only way to confirm you’re buying durable cash flow rather than a story. Pricing in Main Street and lower middle market deals often assumes some level of normalization (owner salary, one-time expenses, and “add-backs”), but lenders and serious buyers still need proof the earnings are real and repeatable.

The biggest failures tend to cluster in predictable places:

• Financial credibility gaps: reported Seller’s Discretionary Earnings (SDE) or EBITDA doesn’t reconcile to bank deposits, payroll, merchant processing, or tax returns.
• Customer concentration risk: one or two customers quietly drive the business—then walk after the sale.
• Inventory verification issues: inventory is overstated, obsolete, or not actually owned free-and-clear.
• Lease and transfer friction: assignment, use clauses, and landlord consent become the bottleneck.
• Hidden claims: liens, tax issues, pending disputes, or unclear ownership of key assets.

If you’re actively searching, start with marketplace inventory and narrow to deals that can support “clean diligence” early: browse businesses for sale on BizTrader.

What Buyers/Investors Should Do Next

Before you request a mountain of files, align on how you’ll run diligence. The goal is speed + certainty.

1. Define the deal shape early

• Asset vs. stock sale: In an asset sale, you’re buying selected assets and typically avoiding many historical liabilities. In a stock sale (or equity purchase), you inherit the entity—so corporate records, tax posture, and contingent liabilities matter even more.
• Call out if there will be seller note (owner financing) or an earnout (contingent payments). Both require stronger reporting, definitions, and controls.

2. Make the request list “reconcilable”
   A good request list includes:

• The document
• The time period
• The system of record (POS, payroll, accounting)
• A verification method (bank, vendor statements, tax filings)

3. Use a staged approach

• Stage 1: “Cheap, fast, decisive” items (tax returns, bank statements, lease, customer concentration, lien/payoff)
• Stage 2: Operational depth (inventory, pipeline/backlog, HR)
• Stage 3: Specialist work (Quality of Earnings QoE, legal deep dives, environmental)

4. Set expectations for a labeled data room
   If you want a practical structure, use this as a blueprint: Data Room Checklist for Small Business Exits.

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Downloadable Due Diligence Request List (Copy/Paste)

Use this as a downloadable template: copy into an email or shared doc, then tailor by industry.

Copy/Paste Email Template

Subject: Due Diligence Request List + Data Room Structure

Hi [Seller/Broker Name]—

Thanks for moving forward. To keep diligence efficient, please upload the items below into a shared data room (folders labeled to match sections). 
If any item does not exist, please note “N/A” and why.Target timeline:
- Initial upload of Priority items (Section A–D): [date]
- Q&A window: [date range]
- Follow-up uploads: [date]
- Closing target (subject to diligence + approvals): [date]Also, please confirm:
1) Proposed structure (asset vs. stock/equity)
2) What is included (inventory, AR/AP, cash, WIP, equipment, IP)
3) Lease/landlord assignment requirements (if applicable)

Thank you,

[Your Name]

A) Deal Basics + What’s Included

• Current CIM (Confidential Information Memorandum) if available, or listing package
• Transaction structure: asset vs. stock sale (draft outline is fine)
• Purchase price mechanics: working capital target, inventory treatment, prorations
• Draft or sample NDA (Non-Disclosure Agreement) if not already executed
• Any draft term sheet or LOI (Letter of Intent) items already agreed (timeline, exclusivity, financing contingencies)

B) Financial Due Diligence (Core)

Ask for “triangulation” across accounting, tax, and cash movement:

Accounting (monthly)

• Profit & Loss (P&L) by month (last 3 years if available, plus YTD)
• Balance Sheet by month (same periods)
• General Ledger detail (YTD + last full year)
• Chart of accounts

Cash proof

• Bank statements (all operating accounts) covering the same periods you’re underwriting
• Merchant processing statements (card processor) for the same periods

Tax returns checklist

• Business federal tax returns (last 3 years) + all schedules
• State income/franchise tax returns where applicable
• Sales & use tax returns and filings (where applicable)
• Payroll tax filings (quarterly) and year-end forms (as applicable)

Add-backs support (SDE/EBITDA bridge)

• A schedule of claimed add-backs with receipts or statements:
  • owner compensation/perks
  • one-time legal/settlement items
  • non-recurring repairs
  • personal expenses run through the business
• Debt schedule (all loans, notes, leases) with current statements
• Capital expenditure (CapEx) history + forward expectations

C) Customers, Revenue Proof, and Customer Concentration

Customer concentration is a valuation driver and a risk driver—request what lets you test retention.

• Revenue by customer (last 12–36 months), with anonymization if needed
• Top customer contracts (and any change-of-control clauses)
• Pipeline/backlog (if project-based) and churn/retention metrics (if subscription/route-based)
• Proof of revenue systems:
  • POS exports (point-of-sale)
  • invoicing/AR reports
  • delivery platform statements (if applicable)
• Pricing lists, discounting policies, and any major upcoming renewals

D) Inventory Verification (If Inventory Matters)

If inventory is meaningful, treat it like cash: verify existence, valuation method, and lien status.

• Inventory listing with SKU detail, aging, and valuation method (FIFO/LIFO/average)
• Last physical count reports + adjustment logs
• Shrink/spoilage write-offs
• Key supplier invoices and statements (to confirm cost and terms)
• Consignment agreements (if any)
• Storage/warehouse arrangements (if any)

E) Lease Review + Real Estate (If Location-Based)

Leases can be the deal. Request everything that controls transferability.

• Full lease, all amendments, addenda, exhibits
• Options (renewal, expansion), assignment/sublease language
• Use clauses, exclusives, signage, hours restrictions
• Estoppel requirements and standard landlord forms
• Rent roll (if multiple locations)
• Utilities, CAM/NNN statements, and historical increases
  For deeper guidance on what blocks closings, see Assignability of Leases and Contracts.

F) Legal, Compliance, and Risk

• Entity formation docs, ownership records, good standing (as applicable)
• Material contracts: vendors, key suppliers, software subscriptions, equipment leases
• Licenses and permits (and transfer/renewal requirements)
• Insurance policies + claims history
• Litigation/threatened claims summary
• Regulatory correspondence, citations, or unresolved issues (if any)
• Reps & warranties expectations (what the seller will stand behind at closing)

G) People, HR, and Transition

• Employee roster (role, tenure, comp, exempt/non-exempt)
• Contractor roster + major 1099 relationships
• Benefit plans and policies (where applicable)
• Any employment agreements, non-solicits, or retention plans
• Proposed transition period details (training plan, hours, duration)

H) Technology, IP, and Data

• List of systems: accounting, POS, CRM, ecommerce, payroll
• Admin access plan (what transfers, when)
• Domain ownership, trademarks, software licenses
• Data privacy/security practices (especially if customer data is core)

I) Liens, UCC, Taxes, and “Can You Deliver Clear Title?”

• Lien schedule (what’s pledged, to whom)
• Payoff letters required at closing
• Any UCC filings known to seller/lender (and releases needed)
• Past-due tax notices, payment plans, or disputes (if any)

If you want a quick “what usually blows up late,” review Due Diligence Red Flags That Kill Deals.

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Valuation Lens: SDE, EBITDA, Add-Backs, and Working Capital

Most Main Street deals are underwritten on SDE (Seller’s Discretionary Earnings): earnings available to a single full-time owner-operator after normalizing discretionary and one-time items. Larger or more manager-run businesses may be underwritten on EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).

Three practical rules:

• Trust reconciliations, not spreadsheets. If earnings are real, they show up in bank deposits, payroll, vendor payables, and taxes.
• Add-backs must be “provable and repeatable.” The more “explainy” the add-back, the more likely you’ll face a re-trade.
• Working capital is part of price even when it isn’t labeled. If the business needs cash to operate (inventory, payroll float, receivables), clarify whether the deal includes a working capital target or post-close adjustment.

When the stakes justify it, consider a QoE (Quality of Earnings) review: it’s designed to test earnings quality, customer concentration, revenue recognition, and sustainability—especially important with seller notes and earnouts.

Deal Process Overview: NDA → LOI → Diligence → Close

A clean process reduces surprises:

1. NDA (Non-Disclosure Agreement)
   Protect confidentiality before sensitive files (customer lists, pricing, payroll) are shared.
2. CIM / Listing package
   Use it to form hypotheses—then test them. Treat it as a starting point, not evidence.
3. LOI (Letter of Intent)
   High-level agreement on price and structure plus key conditions: diligence scope, financing, working capital, inventory treatment, timeline, exclusivity, and approvals (landlord consent, license transfers).
4. Due diligence
   Verify financials, legal posture, operations, and transferability. Run staged gates: customer concentration, lease review, liens.
5. Definitive agreements + close
   This is where reps & warranties, indemnities, escrow/holdback, seller note terms, earnout definitions, and transition support become enforceable realities.

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Due Diligence Checklist Table (Documents + What to Verify)

Use this as your business due diligence checklist “control sheet” inside the data room.

Area	Must-Have Documents	What You Verify	Fast Red Flags
Financial	P&L/Balance Sheet/GL, bank & merchant statements	P&L ties to cash movement; consistency	Large swings, “missing months,” unexplained deposits
Taxes	Federal/state returns, sales tax filings, payroll filings	Reported income aligns with books	Late filings, notices, big differences vs. books
Revenue proof	POS exports, AR aging, invoices, top customer list	Revenue concentration + collectability	One customer dominates; AR is old/uncollectible
Inventory	SKU list, aging, count sheets, adjustments	Existence + valuation method	Obsolete stock; no counts; big shrink
Lease	Lease + amendments, assignment clause	Transferability + landlord process	No assignment; restrictive use clause
Liens/debt	Debt schedule, payoff letters, UCC info	Clear title to assets	Blanket lien with no release path
Legal	Entity docs, contracts, claims summary	Ownership + obligations	Key contracts non-assignable; disputes pending
People	Employee roster, comp, agreements	Retention risk + cost reality	Key staff likely to leave; misclassified labor
Tech/IP	Domains, licenses, access plan	What actually transfers	IP owned personally; non-transferable software

Decision Matrix: How Deep Should Diligence Go?

Deal Profile	Recommended Diligence Depth	Why
Simple owner-operator, low inventory, low concentration	Standard financial + legal + lease gate	Biggest risk is overstated SDE and transfer friction
Meaningful inventory or complex operations	Add inventory verification + vendor confirmation	Inventory and COGS mistakes distort value fast
High customer concentration or contract dependence	Contract review + retention plan + churn analysis	Revenue durability is the deal
Seller note / earnout involved	Strong definitions + reporting controls + QoE	Payment depends on measurable truth
Multiple locations / regulated approvals	Early lease + licensing pathway validation	Timing and approvals can kill closings

Myth vs. Fact

• Myth: “Tax returns are optional if the P&L looks good.”
  Fact: Returns often reveal consistency (or inconsistency) that lenders and buyers care about.
• Myth: “If the lease is assignable, it’s fine.”
  Fact: Assignment language, use clauses, and landlord timelines can still derail closing.
• Myth: “Inventory value is whatever the seller says it is.”
  Fact: Inventory needs existence + aging + valuation support, plus lien clarity.
• Myth: “Customer concentration isn’t a problem if the top customer is ‘happy.’”
  Fact: You need contract terms, renewal dates, and post-close relationship plan.
• Myth: “An earnout solves valuation disagreements.”
  Fact: Earnouts often create disputes unless metrics, controls, and access rights are airtight.

30/60/90-Day Execution Plan (Buyers/Investors)

First 30 days: qualify deals before you fall in love

• Shortlist targets that can produce real documentation quickly.
• Run Stage 1 diligence gates: tax returns checklist, bank statements, lease/landlord terms, customer concentration, lien/payoff path.
• Align on asset vs stock sale and what’s included.

Days 31–60: validate earnings and transferability

• Reconcile earnings: P&L ↔ bank ↔ merchant ↔ payroll ↔ vendor.
• Validate operations: inventory verification, staffing, systems access plan.
• Draft definitive deal terms (seller note/earnout definitions if used).

Days 61–90: de-risk closing mechanics

• Lock landlord consent and any required approvals.
• Finalize reps & warranties scope and indemnity structure.
• Confirm transition period plan and handoff milestones.

CTA: Next Steps on BizTrader

• Start by building a pipeline of deals that can support clean diligence: explore BizTrader’s businesses for sale marketplace.
• If you want a full acquisition roadmap (from search to close), use How to Buy a Business in 2026: Step-by-Step Guide as your process backbone.
• Before you sign exclusivity, scan for common deal-killers and fixable issues: Due Diligence Red Flags That Kill Deals.

This article is for educational purposes only and does not constitute legal, financial, tax, or business brokerage advice. Always consult qualified professionals before making decisions, and verify all requirements with the appropriate authorities and counterparties.