Glossary · underwriting

Due diligence

Also called verification, pre-funding review.

The verification work between approval and funding, testing everything the credit decision assumed: documents, identity, liens, banking, landlord, and existing obligations.

Drafted with AI assistance. Not yet independently checked. Nobody has verified the claims on this page against a source, so treat the figures and legal points as a starting point rather than as settled, and confirm anything you are about to act on. How we check things.

What it means

An approval is conditional until diligence clears. The standard list on a small-business file runs roughly:

  • Bank statements verified through read-only login or direct download rather than uploaded PDFs, which are trivially edited
  • Secretary of state records for entity existence and good standing
  • UCC search for existing filings and other funders
  • Judgment, lien and bankruptcy search on the entity and the guarantor
  • Identity and background checks, OFAC screening
  • Landlord or mortgage verification, and sometimes a site photo or video walkthrough
  • Merchant processing statements where the product is card-based
  • Tax transcripts through Form 4506-C on bank and SBA files

Deeper facilities add a field exam, appraisals, an insurance review, and legal opinions. Advances compress the whole thing into hours, which is the product's selling point and its principal risk.

Where this one catches people

Any request to send money before funding is the shape of an advance-fee scam. Real funders take fees out of proceeds at closing, not by wire beforehand. The scripts vary, quoting an insurance premium, a first payment held in escrow, a lien-release fee or a due diligence deposit, and the tell is always the same: money must leave before money arrives.

Read next

Advance-Fee ScamA funding offer that requires you to send money before any money arrives — an insurance premium, a good-faith… Field examA structured review of a borrower's receivables, payables, inventory and books, performed before an asset-bas… Funding callA recorded call the funder places to the owner before releasing money, confirming identity, bank details, the… Pre-approvalA non-binding indication of what a funder might do based on limited information, subject to full underwriting… StipsThe documents and conditions an underwriter requires before an approval turns into funded money — the list th… UCC-1 financing statement (UCC-1)A short public notice filed with a state office announcing that a creditor claims a security interest in desc…

Due diligence — common questions

What does due diligence mean?

The verification work between approval and funding, testing everything the credit decision assumed: documents, identity, liens, banking, landlord, and existing obligations.

Where does due diligence catch people out?

Any request to send money before funding is the shape of an advance-fee scam. Real funders take fees out of proceeds at closing, not by wire beforehand. The scripts vary, quoting an insurance premium, a first payment held in escrow, a lien-release fee or a due diligence deposit, and the tell is always the same: money must leave before money arrives.

Is due diligence the same as an interest rate?

Due diligence is defined above; if you are comparing it against a rate, check whether the two measures share a time dimension before you put them side by side.

Which products does due diligence apply to?

It is not specific to one product — it appears across the market.

Is there a worked example of due diligence?

Not on this entry. Where a term is arithmetic, the arithmetic is shown; this one is not primarily a calculation.

What else should I read alongside due diligence?

Advance-Fee Scam, Field exam, Funding call, Pre-approval, Stips.

Has this definition been checked?

Not yet. This entry is drafted and live, and the notice at the top says so. Confirm anything you are about to act on.

Is this legal advice?

No. It is a definition. What a clause does in your contract, in your state, is a question for a lawyer licensed where you are.

Can I suggest a term?

Yes — [email protected]. The glossary grows from what people are actually shown in contracts.