Who checks what · Before you buy
What does a lender verify in a business acquisition?
Published · Reviewed by The Diligence Standard Team · Updated
A lender may examine tax returns, cash flow, borrower strength, collateral and transaction terms. Its decision concerns credit risk and lending rules. It does not replace the buyer’s assessment of price, workload, customer durability or post-close capital.
A realistic transaction story
Luis obtained conditional financing for an auto-repair shop and treated approval as confirmation of the deal. The loan model met minimum coverage, but it assumed he would replace the owner-manager without adding payroll. When a realistic manager salary and overdue equipment were included, the personal economics changed sharply.
What the evidence changed
The business could potentially service the loan while still leaving the buyer underpaid and undercapitalized.
What to check
- Write down the exact claim and who supplied it.
- Ask what was independently tested, by whom and under what scope.
- Rebuild the acquisition case using your salary, replacement labor, taxes, reinvestment and downside assumptions.
- Translate any unresolved gap into cash, price, terms, timing or a decision not to proceed.