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Term Loan, SBA Loan, Asset-Based Lending. Each has its own page listing the funders in this directory that offer it and what each one publishes about its terms.

Is this specific to construction?

It is written around how a construction business actually generates and collects cash, which is what makes its funding problem different. The mechanics transfer; the arithmetic may not.

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Are the examples real deals?

No. Every worked example is labelled illustrative and exists to show the arithmetic. What any particular lender charges is on that lender's page, where it publishes it.

Why do you never say what a typical rate is?

Because we cannot source it. A market average assembled from lenders who do not publish prices is a guess with a decimal point on it. Where a lender publishes a figure, we show that figure and say where it came from.

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No. It is general information about how these products work. Outcomes depend on your contract and your state, and a lawyer or accountant licensed where you are is the person to ask about your situation.

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The diligence a lender runs on an acquisition, and why you go first

The diligence a lender runs on an acquisition, and why you should run it first

Four tests, all of which you can perform with documents the seller already has, and each of which has moved a price by six figures.

By Find Me Funders research desk Updated 14 September 2026 965 words 4 min read

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

A lender's diligence on an acquisition is not mysterious and it is not comprehensive. It is a short list of tests designed to find the two or three ways the reported earnings might not be real. Running those tests yourself, before you are under a letter of intent with a deadline, is the cheapest advantage available to a buyer.

Run them in this order, because each one narrows what the next has to cover.

Test one: do the deposits match the revenue

Take reported revenue for the last full year. Take total deposits into every business account for the same period. Strip transfers between the seller's own accounts, loan proceeds, owner contributions and refunds. Compare.

Illustrative only —reported revenue of 2,480,000 against adjusted deposits of 2,214,000. That is 89.3 per cent, and a gap of 266,000.

A gap is not proof of anything. Timing at year end, cash sales banked late, accrual revenue not yet collected and customer deposits all produce legitimate differences. But the gap has to be explained with something specific, and the explanation has to be testable. "That is accrual timing" becomes credible when the December receivables balance moved by roughly the same amount and when the same pattern appears in the prior year.

The gap that is not explainable is either revenue that did not happen or cash that did not reach the bank. Both change the price.

Test two: the margin trend

Pull gross margin by year and, if you can get it, by month.

Illustrative only —38.1 per cent, then 35.4 per cent, then 32.9 per cent. On current revenue of 2,480,000, the business is producing 128,960 less gross profit than it would at the first year's margin.

At the 3.2 multiple being discussed, that trend is worth 412,672 of purchase price — more than the value of most of the contested add-backs put together, and it is usually discussed last or not at all.

Then find the cause, because it determines whether you are buying a fixable problem or a structural one. Input costs the business absorbed and never passed on is one answer. Discounting to hold volume is another. A mix shift toward lower-margin work is a third. Each has a different repair cost and a different likelihood of reversing after you own it.

Test three: customer concentration

List customers by revenue, largest first, for two years.

Illustrative only —the top three at 19, 13 and 9 per cent — 41 per cent of revenue in three relationships. Lenders apply a concentration haircut to cash flow for exactly this, and asset-based facilities cap how much of a borrowing base any single customer can represent.

The buyer's question is narrower than the lender's: are those relationships with the business or with the seller? Ask when each account started, who signed the contract, whether there is a contract at all, when it renews, and whether there is a change-of-control clause. Then ask to speak to them before closing. Sellers resist this and the resistance is usually about deal confidentiality rather than about the accounts, but a seller who refuses any customer contact before closing on 41 per cent of revenue is asking you to buy the riskiest part of the business blind.

Test four: receivables and payables quality

Take the ageing report for both.

Illustrative only —receivables of 418,000 with 22 per cent — 91,960 — over 90 days. Old receivables are not receivables. They are a write-off waiting for someone to take it, and if the seller has not taken it, the balance sheet you are being shown overstates the assets.

Payables tell you something different. A payables ageing that has stretched over two years is a business that has been funding itself with its suppliers. After closing, those suppliers will want to be paid on terms again, and the cash required to normalise them is a day-one cost that belongs in your working capital calculation.

What a lender adds that you cannot

Some tests are theirs and you should ask for the results.

Tax transcript verification through a 4506-C request, comparing the returns you were given to what was actually filed.
A UCC search in the seller's state of organisation, to find liens that must be released at closing.
Judgment, lien and litigation searches on the entity and the owners.
An appraisal or equipment valuation, which is often the first independent view of what the hard assets are worth.
A site visit and, on larger files, a field exam.

Ask to see every one of these when they come back. They are being run on the business you are about to buy and you are, in practice, paying for them.

The buyer's diligence sequence

Reconcile deposits to revenue for two years before you sign a letter of intent.
Build the gross margin trend by month and write down the cause of any move over two points.
List customers by revenue for two years and identify who owns each relationship.
Age the receivables and the payables and price the normalisation.
Walk the fixed asset list physically and note what is past its service life. That number becomes your maintenance capital deduction.
Ask for the payroll register and match it to the organisation chart. Phantom employees and missing key staff both show up here.
Get the last three years of returns directly and match them against the transcripts when the lender's request comes back.

Refuse to waive the tax transcript comparison, refuse to close without customer contact where concentration is above a level you set in advance, and put the cost of anything you find into the price rather than into a promise to fix it later.

Where this applies