Due Diligence Documentation

Prior to funding, all sources will require "Due Diligence" information. Begin assembling a package of due diligence documentation as soon as possible. This package may be reviewed early on to determine if the project is fundable, or if additional financial or management partners for your business are required, in order to get funded.

All the information required in the "Due Diligence" checklist will be thoroughly reviewed by the funding sources used, whether it is the SBA, a bank, venture capital company, private or public company, or a private investor.
"Due Diligence" is a legal requirement for all persons in a fiduciary or responsible position. Having this information early also helps to determine the feasibility and best method for obtaining a funding source for the venture. The "Due Diligence" will be done by an outside agency and the cost will be absorbed by the client, prior to a commitment. Other processing fees may apply.

In order to obtain funding for the project, everything must be closely scrutinized.

Everything that is outlined in the business plan, valuation study, financing plan, and due diligence package will be verified by a third party, or audited by the investing party or bank funding your project.

It is a criminal and civil offense to either misrepresent or omit material facts that would effect the decision of the investor or lending institution. In the event that missing or misleading information concerning your project or any of its principals is discovered, the project will be rejected and progress will cease immediately.

Document Preparation

Preparation of these documents early in the development of the business will assure both the client and the investors that every option has been considered prior to launching or expanding the business. These plans and their supporting research should be developed with the active participation of the principals of the company.

FCS charges NO UPFRONT FEES for service.

DUE DILIGENCE CHECKLIST

A majority of fund seekers, particularly in the early stages of development, question the costs required for due diligence. Due diligence is required in order to establish the feasibility and credibility of the business plan and is often solicited from a reputable 3rd party (i.e.. accounting firm, law firms, etc.). In an attempt to provide a checklist of what is required in a due diligence, First Capital Solutions has listed below a standard checklist for due diligence. It is not a guideline by which "all" lenders, investors, venture capitalists follow, however, it should give you an idea of what is involved. Please do not hesitate to contact the offices of First Capital Solutions if you have any questions.

DUE DILIGENCE CHECKLIST

A. Corporate Organization

1. Articles of Incorporation
2. Bylaws
3. Recent Changes in Corporate Structure
4. Shareholder List
5. Show Number of Outstanding Shares and Percent Owned
6. Stock Option or Share Appreciation Rights Plans
7. Parent, Subsidiaries and Affiliates
8. Shareholder's Agreements
9. Minutes of the Board of Directors

B. Business Information

1. Product Offering
2. Depreciation Method
3. Patents
4. Management Information System

C. Marketing

1. Pricing Strategy
2. Patents Held
3. Distribution Channels
4. Promotion Tactics
5. Customer Base
6. Top Ten Customers By Product Line - Showing Volume
7. Market Share By Product Line

D. Business Plan

1. Most Recent Five Year Business Plan
2. Prior Business Plan

E. Financial Statements

a. Income Statement
b. Balance Sheet
c. Funds Statement
d. Change in Equity Statement
e. Year-to-Date Monthly Statements
f. Five (5) Year Projections
g. Monthly Sales Projections

F. Tax Status

1. Historical Tax Rate
2. Net Operating Losses

G. Operating Data

1. Accounts Receivable
a) Turnover or Days
b) Aging
c) Control and Credit Policy
d) Seasonality
2. Inventory
a) Turnover or Days
b) Obsolescence Policy
c) Sources of Supply
d) Valuation Method
3. Backlog
a) By Product Line
b) Five Year History
c) Current
d) Seasonal Issues

H. Contracts

1. List Major Contracts
2. Terms

I. Capital Expenditures

1. Last Five Years
2. Five Year Gross Projection
3. Detailed Priority List With As Much Analysis as Possible

J. Equipment

1. List
2. Age
3. Appraisal
a) Orderly Liquidation Value
b) Replacement Value

K. Debt and Leases

1. Lender
2. Terms
3. Interest Rate
4. Payment Schedule

L. Litigation

1. Current
a) Description
b) Potential Damages
2. Potential
a) Description
b) Potential Damages

M. Property

1. Description
2. Recent Acquisitions or Spin-Offs
3. Expansion Plans

N. Insurance

1. Property
2. Liability
3. Workman's Compensation
4. Other

O. Competition

1. By Product Line
a) Name, Address and Phone Number
b) Size of Overall Company
c) Size of the Business Unit that is the Competitor
d) Market Share
e) Competitive Advantages and Disadvantages
2. Trade Publications
a) Name, Address and Phone Numbers

P. Management

1. Organizational Chart
2. Resumes
3. Ownership Interest
4. Compensation and Contracts
5. Performance Evaluation Criteria
6. Profit or Gain Sharing Policies

Q. Employee Relations

1. Unions
a) Name of Union
b) Name of Local President, Address and Phone Number
c) Copy of Contract
d) Date of Last Election of Officers
e) Date of Last Contract Ratification
f)Term of Contract
2. Number of Employees by Job Category
3. Wage Rates
4. Benefits
5. Profit or Gain Sharing Policies

R. Pension Plans

1. Funding Status
2. Balance Sheet Treatment
3. Ten Year Projected Cash Expense

S. Retiree Medical Benefits Liabilities

1. Funding Status
2. Balance Sheet Treatment
3. Ten Year Projected Cash Expense

T. Environmental Liabilities

1. Description
2. Phase One Studies
3. Phase Two Studies
4. Five Year Projected Remediation Cost
5. Five Year Projected Compliance Cost

U. Last Corporate Transactions

1. Description of Each
2. Purchase and Sale Agreement of Each