5 Steps to Prepare Your Business for Funding Due Diligence

Once you’ve identified that your business needs funding, the next step is to prepare for the scrutiny that comes with seeking it. This is because before a funder commits capital, they need to understand the business behind the application. They may review your financial records, ownership structure, business activity, existing obligations, and other information to determine whether the business is credible and whether the funding makes sense.

This process is known as due diligence.

For a business owner, due diligence can feel demanding when you start preparing only after a funder requests information. Missing documents, inconsistent numbers, or outdated records can raise unnecessary questions and slow the process. The better approach is to prepare before you need the funding. Here are five steps to get your business ready for funding due diligence.

1. Get Your Business Documents in Order

Start with the basics: make sure you have the documents that establish what your business is, who owns it, and how it operates. Depending on your business and the type of funding you're seeking, these may include:

• Business registration documents
• Ownership and director information
• Relevant licences and permits
• Financial statements
• Business bank statements
• Tax records
• Existing loan or debt information
• Major customer or supplier contracts

Don't just collect these documents. Check that they are current and that the information across them is accurate.

For example, your registered business information should reflect your current ownership and structure. Your financial records should cover the period a funder is reviewing. Keep important contracts accessible, not buried in an old email thread. The goal is simple: if a funder asks for evidence, you should know exactly where to find it.

🔗Read our blog on documents you need to get funding to learn more.

2. Make Sure Your Financial Records Tell the Same Story

Your financial records are likely to receive significant attention during due diligence. Having financial documents is one thing. Having financial information that is consistent and explainable is another. Review your records and compare the information across them. For example:

• Does the revenue in your financial statements align with your business activity?
• Can you explain significant deposits into your business account?
• Do your invoices support the revenue you're reporting?
• Are your major expenses properly recorded?
• Does your debt information reflect your current obligations?
• Are personal and business transactions clearly separated?

Pay particular attention to unusual transactions or significant changes in your numbers. A sudden increase in revenue isn't necessarily a problem. But if you cannot explain why revenue increased, or the supporting records don't tell the same story, it can lead to more questions.

Before approaching a funder, go through your numbers as though you were reviewing someone else's business. If something looks unusual, make sure you understand why and have the evidence to explain it.

3. Review Your Legal and Ownership Structure

Your business should be as clear on paper as it is in your head. Start by reviewing your registration and ownership information. Make sure the details accurately reflect the business today. Check that:

• Your business registration information is up to date
• Ownership records are accurate
• Director information is current
• Important founder or shareholder arrangements are documented
• Required licences and permits are valid
• Key business contracts are accessible
• Any significant legal issues are properly documented

This is also a good time to look for gaps you may have overlooked while running the business. Perhaps the business changed its ownership structure, but the records were never updated. Maybe an important agreement was never formally documented. Or perhaps a licence needs to be renewed. These issues are easier to address before a funder starts reviewing your business.

The aim is not to make your business look perfect. It's to make sure the information about your business is accurate, current, and explainable.

4. Be Clear About Your Business, Revenue and Funding Needs

A funder needs to understand more than your financial statements. They need to understand the business behind the numbers. You should be able to explain clearly:

• What your business does
• Who your customers are
• How your business makes money
• What drives your revenue
• What your highest costs are
• Your current financial position
• How much funding you need
• What you intend to use the funding for
• How the funding will support the business

Your funding request should make sense in the context of your business. If you're asking for funding to expand inventory, for example, you should be able to explain what you're buying, why you need it, how much it will cost, and how the investment is expected to support the business.

The same applies to your revenue. Don't just know your total revenue. Understand what is driving it. Know which products, customers, markets, or activities contribute to your income and where your major costs come from. When you understand the story behind your numbers, you're better prepared to answer questions about them.

5. Organise Everything So It's Easy to Verify

Once you've gathered your documents and reviewed your business information, bring everything together in an organised system. You can create simple folders for:

• Company: Registration, ownership, directors, licences
• Financials: Financial statements, bank statements, tax records, cash flow information
• Commercial: Customer contracts, invoices, sales records, supplier agreements
• Legal: Contracts, intellectual property, regulatory documents
• Funding: Existing loans, previous funding, financial projections, and your intended use of funds

Keep the information current and make sure important documents are easy to locate. This matters because due diligence is ultimately about verification. The faster a funder can find the information they need and connect it to the claims you're making, the easier it is to understand your business.

You don't need hundreds of documents sitting in different folders. You need the right evidence, organised and ready to verify.

Build Greater Confidence in Your Business With Acreed

Preparing for due diligence starts with understanding what your business looks like from the outside. Acreed Insights has built Acreedify to help you with that.

It helps businesses demonstrate their credibility through verification and an Acreed Credibility Score out of 100. Businesses can receive a certificate that funders can check when assessing their credibility. Instead of waiting for a funder to ask whether your business can be verified, you can start by understanding and demonstrating your business's credibility yourself.

Prepare your business. Know your credibility. Get ready for the right funding opportunities. Join our waitlist.