If you’re financing your deal with an SBA loan or working with a lender to close a business acquisition, chances are you’ve heard something along the lines of:
“The bank will do their own due diligence.”
That’s true. But it’s also incomplete.
Because here’s the catch: a bank’s due diligence isn’t designed to protect you. It’s designed to protect them.
And if you treat a lender’s diligence process as a substitute for your own, you may end up with a business that technically checks the boxes—but comes with risks and surprises you weren’t prepared for.
Let’s break down the key differences between bank and buyer diligence, and why both need to be handled—just not confused.
Bank Diligence Is About Risk to Repayment, Not Operational Risk
Banks aren’t trying to understand how a business runs day to day. They’re trying to understand one thing: Can this business service the debt we’re about to issue?
Their focus is narrow and cash-flow driven:
- Historical and adjusted EBITDA
- Revenue stability
- Customer concentration
- Working capital sufficiency
- Collateral and asset coverage
- Personal guarantees or guarantees from other assets
To be clear, this is necessary diligence. Banks need to protect their downside. But it’s not holistic.
A lender may be fine with a business that has outdated tech systems, shaky vendor relationships, or a founder who’s still making every major decision—so long as the debt coverage ratio pencils out.
As a buyer, that’s not enough.
What the Bank Won’t Dig Into (But You Should)
Here are just a few areas that often fall outside a lender’s due diligence scope—but can directly impact your success post-close:
Owner Dependency
Will the business fall apart when the seller leaves? The bank doesn’t care—unless that risk shows up in the numbers.
Culture and Key Employees
Are you inheriting a cohesive team or a fractured one? If three key staffers walk out the door during transition, the business could look very different in a hurry.
Systems and Infrastructure
Is the business running on modern systems that scale—or clunky spreadsheets that the seller built ten years ago?
Growth Constraints
Are there regulatory hurdles, market saturation, or sales bottlenecks that could cap your upside?
Operational “Workarounds”
Is the business functioning smoothly—or just propped up by the seller’s duct-tape solutions and heroic effort?
A bank doesn’t care if you’re buying a business that’s inefficient, stressful to run, or full of operational landmines—so long as it keeps paying the loan.
You, on the other hand, are the one who has to live with the outcome.
The Danger of False Confidence
Here’s where things get risky.
A lender signs off on the loan. The QoE report passed their review. Your financing is approved.
You assume: “Great! The bank did their checks. This must be a solid business.”
That’s exactly when buyers let their guard down. But the reality is: just because a business qualifies for financing doesn’t mean it’s a good buy.
In fact, we’ve seen plenty of buyers secure SBA financing for businesses that had major operational issues waiting just below the surface—issues that were outside the bank’s scope, but well within the buyer’s risk exposure.
What You Actually Need from Your Diligence
A good due diligence process should do two things:
- Satisfy the lender. (So your financing goes through.)
- Satisfy you. (So you know what you’re walking into.)
That second part is often where things fall short.
Before closing, make sure your diligence gives you clarity on:
- Real, normalized EBITDA (not just seller add-backs)
- Key risks to post-close operations
- Hiring or infrastructure needs
- Customer retention and market positioning
- The transition plan and knowledge transfer from the seller
Your diligence should answer not just “Is this business profitable on paper?”—but also “Is this a business I want to own and operate?”
Final Thoughts: Two Lanes, One Deal
You don’t need to duplicate what the bank is doing—but you do need to supplement it.
Think of it as two parallel tracks:
- The bank is protecting its investment.
- You’re protecting your future.
Sometimes those interests overlap. Sometimes they don’t.
That’s why it’s critical to work with a diligence team that understands both audiences—so the final report supports your lender’s underwriting and your own peace of mind.
The bottom line? Getting a loan approved is a win. But getting a deal you can live with—and thrive in—is the real goal.
Need a diligence team that checks both boxes?
At Rapid Diligence, we help buyers go beyond lender requirements to truly understand the business behind the numbers. If you’re prepping for close or navigating an SBA deal, let’s talk.
Contact us today or book a free consultation and learn how we can be a trusted partner on your next deal!
