Documents needed to sell a business: the due diligence list

What is due diligence when you sell a business?

Due diligence is the buyer's check, after you have agreed on a price, that what you told them is true. In most deals it starts when you accept an offer and sign a letter of intent (a short document that records the price and main terms), which usually sets the length of the period. One business law firm puts that at typically 30 to 90 days.

How quickly and completely you answer the buyer's request list can tell them what kind of business they are buying. Documents that arrive promptly, named and organized, tend to build a buyer's confidence; documents that trickle in over weeks can make a buyer wonder what is missing.

What does the buyer's lender ask for?

A buyer may finance the purchase with a loan guaranteed by the US Small Business Administration (SBA). Its main program is the 7(a) loan. Rules change, so check sba.gov for current terms. What follows is from the SBA's lender rulebook, SOP 50 10 8.1, effective October 1, 2026.

A buyer new to the business must put in at least 10% of the total project cost (the price plus the other costs of getting the business operating). A note from you (part of the price, paid over time) counts toward that only if you take no payments for as long as the buyer's SBA loan runs, and only up to half of the required amount. Selling to a buyer with an SBA loan covers what that means for you.

From the seller, the SOP has the lender analyze the three most recent year-end financial statements (tax returns, or a balance sheet with a debt schedule and an income statement), plus the latest interim statement.

What does the lender check on its own?

On an SBA-backed purchase the lender checks the numbers itself:

• Your tax returns, against the IRS. The lender must get IRS tax transcripts, the IRS's own record of what you filed, and reconcile them with your statements.
• Your price, against a valuation. For a business price above $350,000, not counting owner-occupied real estate, the lender must order a valuation from an independent, accredited appraiser. At $350,000 or less it may do its own valuation, unless buyer and seller are closely related. If the price is higher than the valuation, the buyer must cover the gap with equity: their own money or, in limited cases, a seller note on full standby.
• Your earnings, in depth. In the usual case of a buyer new to the business, at a business price of $3 million or more, not counting owner-occupied real estate, the lender must also get an independent quality of earnings report, done for its benefit, not yours. It includes a cash proof: rebuilding what came in and went out from your bank statements and comparing it with your income statement and tax return.

Due diligence checklist: the full document list

Financial

Small-business accounts are prepared for tax reporting, not to show a buyer the cash flow available to an owner. Recasting presents the same records in the way buyers and lenders assess them.

• Business tax returns, three years (for a sole proprietor, Schedule C)
• Profit-and-loss statements and balance sheets, three years, plus current year to date
• A recast of each year showing seller's discretionary earnings (profit plus your pay and your personal or one-off costs), with each add-back listed and backed by proof
• Bank statements and monthly sales, three years
• Accounts receivable and payable (who owes you, whom you owe), listed by how overdue each is
• A list of debts, loans and equipment leases
• Sales tax and payroll tax filings

Customers and sales

• Sales by customer, and by product or service line, three years
• Customer contracts and service agreements
• Your pipeline, order book or backlog

Property and equipment

• The lease, with every amendment, and what it says about assigning it
• If you own the building: the deed, and your plan to sell or lease it to the buyer
• An equipment and vehicle list with age, condition and whether each is owned or financed
• Inventory count and how it is valued

People

• Employees: role, start date, pay, benefits, full- or part-time
• Employment, non-compete and confidentiality agreements
• Contractors, and how they are classified

Legal and compliance

• Formation documents and ownership records
• Licenses, permits and certifications, with expiration dates and whether they transfer
• Insurance policies and claims history
• Supplier and distributor agreements
• Any lawsuits, disputes or regulatory issues, past and present
• Trademarks, domain names, software licenses

Operations

• Written procedures for the main jobs
• Systems and software, and who has the passwords

In what order do you release the documents, and when do you need an NDA?

You do not hand over the whole folder on day one. In a 2019 guide, Brown Fox, a business law firm, advised sellers to require a confidentiality agreement (an NDA) before sharing confidential information, and to hold back customer and employee names until later in due diligence. A common order, not a rule, is:

Stage	The buyer gets	Held back
1. Summary	One or two pages, no business name: industry, rough size, general area	Your name, customer and employee names
2. NDA signed	Your name and a financial summary, enough to make an offer	Customer names, contracts, employee details
3. Letter of intent signed	Financial statements, lease and equipment list, with customers and employees shown as codes (Customer A, Employee 1)	Names, customer contracts, individual pay
4. Later in due diligence	The rest of the folder above, in a secure online folder (often called a data room)	Little

Let your broker, if you have one, or your lawyer set the stages and draft the NDA, and keep a log of who received what.

How do you organize it?

Number the folders in the order above and name every file the same way: the year, then what it is ("2025 Business tax return"). Add a one-page index listing what is missing and when it will arrive.

What if you are selling the assets, not the company's stock?

In an asset sale the buyer takes the business's assets, not the company, so the lease, key contracts and vehicle titles transfer one by one (see asset sale vs stock sale). Whether a lease or license can be assigned depends on the document and the landlord, so ask your lawyer early.

Where to start

Few businesses have a complete folder. A missing document can usually be replaced or explained, but one the buyer discovers in week six is harder to explain.

This week, list every item above and mark what you have. Start with the ones that take longest: read what your lease says about assigning it (ask your lawyer before you raise a sale with the landlord), and book time with your CPA to tie your statements to your tax returns.

Keep reading

• Selling to a buyer with an SBA loan: what changes for you
• What is a quality of earnings report, and do you need one to sell?
• Asset sale vs stock sale: what's the difference when you sell a small business?

This guide is general information, not tax, legal or valuation advice. Every business is different: talk to your accountant, lawyer and broker about yours.