{"ok":true,"canonical_url":"https://dealroom.so/for-lenders/questions/what-specific-due-diligence-is-required-from-a-lender-if-the-business-being-acquired-has-s","api_url":"https://dealroom.so/api/public/questions/what-specific-due-diligence-is-required-from-a-lender-if-the-business-being-acquired-has-s","question":"What specific due diligence is required from a lender if the business being acquired has significant customer concentration?","topic":"Change-of-ownership underwriting","audience":"lender","bot_mode":"lender","short_answer":"Lenders must perform enhanced due diligence to assess the risk of losing a major customer, including evaluating contracts, customer relationships, and the buyer's plan to diversify the customer base.","rule":"Significant customer concentration (e.g., one customer accounting for >20-30% of revenue) poses a substantial risk to the business's stability and cash flow. Lenders should review contracts for duration and renewal terms, analyze the historical relationship, assess the likelihood of retention, and evaluate the buyer's strategy to mitigate this risk.","example":"A business acquisition involves a company where 40% of revenue comes from a single customer. The lender requests copies of the customer contract, interviews the seller about the relationship, and requires the buyer to provide a detailed plan for either securing a long-term agreement or diversifying the customer base within a reasonable timeframe.","what_lenders_check":"The primary concern is the potential for a sudden, material drop in revenue if the concentrated customer is lost, jeopardizing repayment. The lender must ensure the business can withstand such an event or has a credible plan to reduce dependence, maintaining prudent lending standards.","required_facts":["Customer concentration","Due diligence","Acquisition risk","Revenue stability","Diversification plan"],"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":"How does a lender evaluate the reasonableness of a business purchase price when the seller note is fully subordinated?","url":"https://dealroom.so/for-lenders/questions/how-does-a-lender-evaluate-the-reasonableness-of-a-business-purchase-price-when-the-seller"},{"question":"What are the specific requirements for valuing inventory and equipment in a business acquisition for a 7(a) loan?","url":"https://dealroom.so/for-lenders/questions/what-are-the-specific-requirements-for-valuing-inventory-and-equipment-in-a-business-acqui"},{"question":"When is an independent business appraisal mandatory for a 7(a) loan financing a business acquisition with a purchase price over $500,000?","url":"https://dealroom.so/for-lenders/questions/when-is-an-independent-business-appraisal-mandatory-for-a-7-a-loan-financing-a-business-ac"},{"question":"How does the SBA view a change of ownership where the new owner has no prior industry experience?","url":"https://dealroom.so/for-lenders/questions/how-does-the-sba-view-a-change-of-ownership-where-the-new-owner-has-no-prior-industry-expe"},{"question":"Is an independent business appraisal required for a 7(a) loan financing a business acquisition with a purchase price exactly $500,000?","url":"https://dealroom.so/for-lenders/questions/is-an-independent-business-appraisal-required-for-a-7-a-loan-financing-a-business-acquisit"},{"question":"When must a lender require an independent business valuation for a change of ownership 7(a) loan, and what are the specific thresholds?","url":"https://dealroom.so/for-lenders/questions/when-must-a-lender-require-an-independent-business-valuation-for-a-change-of-ownership-7-a"}],"related_terms":[{"term":"Due diligence","url":"https://dealroom.so/glossary/due-diligence"},{"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"},{"term":"Enhanced Due Diligence","url":"https://dealroom.so/glossary/enhanced-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":"2026-06-13","sba_rule_sources_checked_through":"2026-06-13"},"citation":{"label":"DealRoom.so SBA 7(a) Q&A","url":"https://dealroom.so/for-lenders/questions/what-specific-due-diligence-is-required-from-a-lender-if-the-business-being-acquired-has-s","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."]}