Due diligence checklist for borrowers: what funders will ask for

Financial documentation

Expect requests for two to three years of statutory accounts, current year management accounts, an aged debtor and creditor listing, six to twelve months of bank statements, and a rolling cash flow forecast. For businesses with more than one entity, consolidated group accounts alongside individual entity accounts are usually required so the funder can see intercompany trading clearly.

Tax position matters too: confirmation that corporation tax, VAT and payroll taxes are up to date, or a clear explanation and evidence of any agreed payment plan, prevents a late stage surprise that can stall or kill a transaction close to completion.

Corporate and legal documentation

Funders will want certificates of incorporation, the current shareholder register, articles of association, and details of any existing charges registered against the company. Where security is being taken, up to date property title information, lease agreements, and details of any existing finance secured against assets involved are essential early requests.

Material contracts, whether with key customers, suppliers or landlords, are often reviewed in more detail than borrowers expect, particularly where the business is reliant on a small number of large contracts. Having these organised and ready to share materially speeds this stage.

Ownership and management information

Know your customer requirements mean funders need identification and proof of address for all significant shareholders and directors, along with a clear picture of the ultimate beneficial ownership of the business, particularly where holding companies or trusts sit above the operating entity. Complex ownership structures without a clear chart tend to slow this step considerably.

A short management biography summary, covering relevant sector experience of the key individuals, is frequently requested and rarely prepared in advance, so having it ready is an easy way to save time.

Sector or transaction specific items

Property transactions require valuations, planning documentation and any environmental reports. Acquisition funding requires the sale and purchase agreement, target company accounts, and often a quality of earnings report. Trade finance transactions require the underlying contracts, purchase orders and evidence of the buyer or supplier relationship.

Building the file before it is asked for

Assembling this material into a single organised folder before a funding process starts, rather than gathering it piecemeal as requests arrive, is the single most effective way to prevent a due diligence process dragging on for months. It also signals to the funder that the business is well run, which itself has a quiet but real influence on the credit decision.