In order to make the due diligence as smooth and easy as possible you should have any paper work, records and contracts that the buyer may request immediately available.

Of course much of what is listed in the due diligence checklist below are things that you collected, organized and spruced up at the beginning of the selling process. So hopefully much of your preparation work is already done .

It is not your job to do the buyer’s due diligence for them, but you are responsible for providing them with organized paperwork, tax returns, contracts etc. on demand so they can do they work they need to as quickly as possible. Buyer’s may begin to feel pressure build as the closing of the deal approaches. The degree to which you are organized and efficient can go a long way to maintaining the momentum. The last thing you want is for the buyer to become paranoid thinking that you are dragging your feet .

So make sure you have the following checklist information available before the due diligence phase officially begins:

1.) Tax Returns: Buyers will usually want to see the last 3 years tax returns. Some buyers may request up to 5 years of returns

2.) Detailed Financial Statements. As we stated in the Preparation Section . it is important to have your financial statements as organized and professional looking as possible Depending on your situation, you may have already shown the buyer your actual financial statements, but in many cases they will have only seen your recast financials . As with your taxes returns, most buyers will want to see 3-5 years worth of statements.

3.) Leases. Especially for location sensitive businesses, the buyers will want to see the exact terms of the lease. In addition to the rent and the amount of time left on the lease, the buyer will be particularly interested to confirm that the lease is in fact transferable to a new owner and under what conditions.

4.) Real Estate Related Paperwork :If the sale includes the real estate you will have to provide information on all mortgages, deeds of trust and other liens or debts that may affect the title.

5.) Contracts :Contracts with both suppliers and customers as well as employees. The buyer will be interested not only in the terms of any contracts but will also want to verify the contract is transferable to a new owner.

6.) Accounts Receivable. In many small business sales the owner retains the accounts receivable. But if the accounts receivable are a part of the deal the buyer will want to see the aging of them and also how many accounts have a history of paying late.

7.) Corporate Or LLC Records. This obliviously only applies to entity sales

8.) Licenses & Permits. Not only will the buyer want to see all the licenses and permits that are required for your type of business but they will also be interested to find any problems that might prevent them from being renewed.

9.) Intellectual Property. This would include any and all patents, copyrights, trademarks and service marks. Also included in this category would be any trade secrets: recipes, unique processes or procedures, customer lists and supplier lists.

10.) Inventory: Some buyer will just do a spot check of your inventory, others may take the time to count, inspect and value every single item.

NEXT. The Red Flags Buyers Look For During Due Diligence