Free checklist · 2026 edition
Due Diligence Checklist for Buying a Business
What to request and review before you close, so you can buy with confidence.
- 30 items in 7 sections
- A red flag to watch for on every item
- SBA 7(a) guidance on the $3M QoE rule
- 8-page PDF sent to your email
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From the CPA team behind 350+ deals since 2022.
- 350+deals since 2022
- 90deals in the last 12 months
- $1B+in combined transaction value
- Nationwideremote team, clients across the US
What’s inside
Seven sections, 30 items
One principle runs through the checklist: every number in the marketing package should tie to the tax returns, the books and the bank.
- 01
Earnings: does the profit hold up?
6 itemsTax returns, IRS transcripts, monthly financials, add-backs, owner pay and related-party items.
- 02
Cash: does the money show up?
2 itemsBank and processor statements, and a proof of cash.
- 03
Revenue quality
4 itemsRevenue by month, customer concentration, contracts and billable hours.
- 04
Working capital and the balance sheet
6 itemsAR and AP aging, deferred revenue, inventory, the working capital peg and debt-like items.
- 05
People and payroll
4 itemsCompensation, key people, payroll tax filings, and W-2 vs. 1099 classification.
- 06
Taxes and compliance
2 itemsSales tax nexus, tax notices, licenses and deal structure.
- 07
Assets, operations and risk
6 itemsFixed assets and capex, leases, liens, insurance, systems and reputation.
- +
SBA loans and when to bring in a CPA
Final pagesThe SBA’s quality of earnings rule for 7(a) deals, QoE timing and published pricing.
Send your first request right after the letter of intent (LOI) is signed. Most items come from the seller or broker, and the answers will lead to more specific follow-up questions.
A look inside
Three items from the checklist
02 · Cash
Proof of cash
From: You or your CPA
Monthly comparison of deposits to reported revenue and disbursements to reported expenses.
Why it matters: One of the most important checks on reported results. For SBA 7(a) deals of $3M or more it is now a required part of the Quality of Earnings report.
Red flag: Deposits that don’t tie to revenue, personal account transfers, or heavy cash sales.
03 · Revenue quality
Customer concentration
From: Seller
Top 10 customers by revenue for each year, with each one’s share of total revenue.
Why it matters: Losing one large customer after close can change the economics of the deal.
Red flag: A large share of revenue from one customer who is loyal to the owner personally.
04 · Working capital
Monthly NWC trend and the peg
From: You or your CPA
Net working capital calculated for each month of at least the trailing twelve months.
Why it matters: A normal, seasonally adjusted level supports a fair peg. Set too low, you fund working capital yourself right after closing.
Red flag: A peg based on a single month-end balance.
When to bring in a CPA
When a quality of earnings review is worth it
You can work through much of this list yourself. A Quality of Earnings (QoE) review adds an independent look at add-backs, cash, working capital and debt-like items, so you close knowing what you are buying.
It’s usually worth it when
The price is significant, the books are complex, you’re using SBA financing, or the CIM doesn’t tie to the returns and the bank.
Timing
Engage right after the LOI is signed. A QoE typically takes 2–4 weeks.
Deals under $5MM
About $15,000
Purchase price under $5MM
$5MM to $15MM deals
$18,000–$25,000
Also any QoE an SBA lender requires
Deals over $15MM
From $25,000
Also sell-side QoEs
Fixed fees, quoted in writing before we start.
Financing with an SBA 7(a) loan?
Under SBA SOP 50 10 8.1 (effective October 1, 2026), 7(a) acquisitions and expansions with a purchase price of $3M or more need a QoE that includes a proof of cash. Your lender will confirm how the rule applies to your deal.
Client perspectives
From buyers we’ve worked with
“I did not end up acquiring the business I hired Midwest CPA to diligence, and I feel confident in that decision thanks to the analysis Chris did and the questions he asked of the seller.”
“In our recent acquisition of a roadside repair company, Chris Barrett proved to be an absolute asset, exceeding all expectations.”
“He assisted me with my QoE for my business acquisition and he and the team performed the task efficiently and effectively.”
FAQ
Due diligence checklist: frequently asked questions
What should a due diligence checklist for buying a business include?
The documents and analyses that show whether the earnings, cash and working capital in the marketing package are real: tax returns and IRS transcripts, monthly financials, add-backs, bank statements and a proof of cash, revenue and customer concentration, working capital, payroll, taxes, assets and legal risk. Our checklist covers 30 items in seven sections, each with what to request, who usually provides it, why it matters and the red flag to watch for.
When should I start due diligence?
Send your first request right after the letter of intent (LOI) is signed. The answers lead to more specific follow-up questions, so it pays to start early. If you plan to get a quality of earnings report, engage right after the LOI as well. A QoE typically takes 2–4 weeks.
What is a proof of cash?
A month-by-month comparison of bank deposits to reported revenue and disbursements to reported expenses. It is one of the most important checks on whether reported results are real, and it is a required part of the QoE for SBA 7(a) deals of $3M or more.
Does an SBA loan require a quality of earnings report?
Under SBA SOP 50 10 8.1 (effective October 1, 2026), 7(a) acquisitions and expansions with a purchase price of $3M or more need a QoE that includes a proof of cash. The lender orders the report. Your lender will confirm how the rule applies to your deal. Read more about the SBA QoE requirement.
How much does a quality of earnings report cost?
At Midwest CPA, QoE fees are fixed and based on deal size: about $15,000 for deals under $5 million, $18,000 to $25,000 for deals of $5 million to $15 million or when an SBA lender requires the QoE, and from $25,000 for deals over $15 million and sell-side QoEs. See QoE pricing.
How do I get the checklist?
Enter your name and email in the form at the top of this page and we’ll email you the 8-page PDF. If you don’t see it, check your spam folder or contact us.