{"ok":true,"canonical_url":"https://dealroom.so/sba-7a/questions/what-specific-due-diligence-does-a-lender-perform-on-the-target-business-s-contracts-and-k","api_url":"https://dealroom.so/api/public/questions/what-specific-due-diligence-does-a-lender-perform-on-the-target-business-s-contracts-and-k","question":"What specific due diligence does a lender perform on the target business's contracts and key customer relationships?","topic":"Application timeline","audience":"borrower","bot_mode":"buyer","short_answer":"Lenders review key customer contracts, supplier agreements, and service agreements to assess business stability, revenue predictability, and potential risks associated with customer concentration or expiring contracts.","rule":"While not explicitly detailed in boilerplate SBA forms, prudent lending standards require lenders to assess the underlying operational health and stability of the acquired business. Analyzing contracts and customer relationships helps gauge revenue sustainability and identify potential vulnerabilities beyond financial statements.","example":"For a business heavily reliant on a few large clients, the lender will request copies of those client contracts to verify terms, duration, and renewal history, assessing the risk of losing significant revenue post-acquisition.","what_lenders_check":"Lenders are concerned about customer concentration risk, expiring key contracts, and any terms within contracts that could negatively impact the acquired business's future cash flow or profitability.","required_facts":["Customer contracts","Supplier agreements","Revenue predictability","Customer concentration","Risk assessment"],"source_families":["SOP 50 10 - Lender and Development Company Loan Programs","13 CFR Part 120 - Business Loans"],"official_sources":[{"title":"SOP 50 10 - Lender and Development Company Loan Programs","url":"https://www.sba.gov/sites/default/files/2025-05/SOP%2050%2010%208%20Technical%20Updates%20effective%206.1.2025.docx"},{"title":"13 CFR Part 120 - Business Loans","url":"https://www.ecfr.gov/current/title-13/chapter-I/part-120"}],"related_questions":[{"question":"What are the major stages of the SBA 7(a) loan application process, and how long does each typically take?","url":"https://dealroom.so/sba-7a/questions/what-are-the-major-stages-of-the-sba-7-a-loan-application-process-and-how-long-does-each-t"},{"question":"What role does the business broker play in expediting or delaying the SBA 7(a) loan application process for an acquisition?","url":"https://dealroom.so/sba-7a/questions/what-role-does-the-business-broker-play-in-expediting-or-delaying-the-sba-7-a-loan-applica"},{"question":"What factors allow a lender to use their delegated authority (e.g., Preferred Lender status) to speed up SBA loan approval?","url":"https://dealroom.so/sba-7a/questions/what-factors-allow-a-lender-to-use-their-delegated-authority-e-g-preferred-lender-status-t"},{"question":"How long does the SBA 7(a) loan application process typically take from start to funding?","url":"https://dealroom.so/sba-7a/questions/how-long-does-the-sba-7-a-loan-application-process-typically-take-from-start-to-funding"},{"question":"What is the repayment term for an SBA 7(a) loan used for business acquisition?","url":"https://dealroom.so/sba-7a/questions/what-is-the-repayment-term-for-an-sba-7-a-loan-used-for-business-acquisition"},{"question":"Do I need a business plan for an SBA 7(a) loan application for a business acquisition?","url":"https://dealroom.so/sba-7a/questions/do-i-need-a-business-plan-for-an-sba-7-a-loan-application-for-a-business-acquisition"}],"related_terms":[{"term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"term":"Target Business","url":"https://dealroom.so/glossary/target-business"},{"term":"Operational due diligence","url":"https://dealroom.so/glossary/operational-due-diligence"},{"term":"Legal due diligence","url":"https://dealroom.so/glossary/legal-due-diligence"},{"term":"Inadequate due diligence","url":"https://dealroom.so/glossary/inadequate-due-diligence"},{"term":"Heightened due diligence","url":"https://dealroom.so/glossary/heightened-due-diligence"}],"related_tools":[{"name":"SBA 7(a) payment & fee calculator","url":"https://dealroom.so/sba-7a/calculator"},{"name":"Find an active SBA 7(a) lender","url":"https://dealroom.so/lenders"}],"data_freshness":{"last_reviewed":"2026-06-14","sba_rule_sources_checked_through":"2026-06-14"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/sba-7a/questions/what-specific-due-diligence-does-a-lender-perform-on-the-target-business-s-contracts-and-k","source_type":"DealRoom Q&A"},"caveats":["Grounded in the current SBA rulebook; verify against official sources before relying on it for a live deal.","Not legal, tax, or financial advice and not an approval decision."]}