Due Diligence Checklist for an Off-Market Small Business (What Public Records Already Told You, and What They Cannot)
A brokered deal arrives with a CIM, a data room and a process calendar. An off-market deal arrives with a phone number. You found the company through public records, the owner has probably never sold a business before, and there's no broker to assemble documents or keep the timeline moving. That's you now.
The good news is that off-market diligence runs in two layers, and the first layer is finished before you ever make contact. Public records already told you the business is real, roughly how big it is, how long it has operated and what institutional debt it carries. The second layer starts after the owner says yes and you sign a letter of intent with an exclusivity window. This checklist covers both layers, and it's blunt about the line between them.
The order of operations
Records first, then the conversation, then the LOI, then documents. Skipping ahead breaks deals. If you email an owner a 60-item document request before you've built any trust, you'll never hear back, which is why the first approach should reference what you already verified publicly instead of asking for anything. Save the requests below for after a signed LOI. The SBA's guide to buying an existing business lists the letter of intent and the confidentiality agreement first among the documents it says an attorney and an accountant should help you create and evaluate, ahead of financial statements and tax returns.
Layer one: what public records already told you
Run these checks before first contact. They're free and legal, and none of them need the owner's cooperation. Scouly automates this layer across 173,769 companies in 7 verticals, but every source below is open to anyone.
- SBA 7(a) and 504 loan history, from the SBA FOIA files. Origination year, approval amount, lender, term. A loan proves a bank underwrote the business with real collateral and real cash flow. A 504 loan usually means the company owns its building. And the maturity date tells you when the owner's next natural decision point arrives.
- PPP loan records, from the PPP FOIA data. Loan size was formula-driven off payroll, so it backs into a defensible payroll and headcount band. The method is in our guide to estimating payroll from PPP data.
- Form 5500 filings, via the Department of Labor's EFAST filing system. If the company sponsors a retirement plan, the filing reports participant counts year over year. A shrinking participant count is worth knowing before you write. Full walkthrough in Form 5500 for business acquisition.
- The state business registry. Formation date, current standing, registered agent, officer names, amendments and past name changes. A 1994 formation date is evidence of durability that no seller narrative can fake.
- Local density. Count competitors in the trade area. Fragmented markets mean more targets and fewer competing buyers.
These signals also support a rough value floor. Loan sizes and quartiles by industry are a sanity check on any price conversation, and the approach is laid out in estimating what a business is worth from public records. You can compare a specific SBA loan against its industry quartiles with the deal benchmark tool.
What public records cannot tell you
Be honest with yourself here, because this is where buyers get hurt.
No public dataset reports a private company's revenue. None reports EBITDA, gross margin, owner compensation or add-backs. PPP gives you a payroll band from 2020 and 2021, which is a size proxy with real error bars, and an SBA loan is a floor on what one bank once found financeable. Anyone selling "estimated revenue" for a 12-person plumbing company is modeling, and for businesses this small the error swallows the estimate.
Records also can't show customer concentration, the condition of the trucks, the lease renewal terms, a dispute that hasn't reached a courthouse, or whether the business is really just the owner's personal relationships wearing a company name. Owner add-backs deserve special suspicion. The seller will present adjusted earnings where their salary, their spouse's car and the Florida trip are added back to profit. Every one of those adjustments needs a receipt. That verification is what layer two is for.
Layer two: the post-LOI checklist
Request these after the LOI is signed. Give the owner the list in one document, ask for a shared folder, and expect several weeks of back and forth. An owner who has never sold before will need help finding half of it.
Financial
- Three years of financial statements, plus a monthly P&L for the trailing twelve months.
- Three years of federal and state business tax returns. Compare them line by line against the financial statements. Gaps between the two are the single most common diligence finding.
- Bank statements for the trailing twelve months, tied to reported revenue.
- Accounts receivable and payable aging reports.
- A full debt schedule. Check it against the SBA loan record you pulled in layer one. A loan the seller forgot to mention is a serious signal.
- The add-back schedule, with documentation for every adjustment.
- Inventory and equipment lists with age and replacement cost.
Legal and regulatory
- Formation documents, ownership records, and any buy-sell agreements among current owners.
- Every contract that survives the sale, including customer agreements, supplier terms and equipment leases.
- Licenses and permits, and whether they transfer to a new owner or must be reapplied for. The SBA puts this first on its list of things to look into when buying an existing business: you either take the needed licenses over from the current owner or apply for them yourself.
- Litigation history, open claims, and a UCC lien search in the state of formation.
- Zoning confirmation for the operating location.
- Trademarks, the web domain, and phone numbers, with proof the company rather than the owner personally holds them.
Operational
- Top vendor list with pricing terms, and whether any pricing depends on the current owner's relationship.
- Software and systems list, with who holds the admin credentials.
- Written procedures, or an honest map of what lives only in the owner's head.
- Current backlog, unfilled orders and work in progress.
- Insurance policies and three years of claims history.
People
- An org chart and a current payroll register. Tie total payroll to the PPP-derived band from layer one.
- Employment agreements, non-competes and any handshake deals about pay or ownership.
- Benefits documents, including the retirement plan behind that Form 5500 filing.
- Turnover for the past two years and any open roles.
- Which employees know a sale is coming. Usually none, and the transition plan has to respect that.
Customers
- Revenue by customer for three years, and what share of it the largest account carries. Heavy concentration in one customer belongs in the price.
- Recurring revenue versus one-off project revenue.
- Contracts with change-of-control clauses that let a customer walk at closing.
- Online reviews and complaint history, which you can start on before the LOI.
Real estate
- The deed or the lease. If the seller owns the property, decide early whether the building is in the deal, since a 504 loan from layer one usually means the building secured the debt.
- Lease term, renewal options and assignment rights if the company rents.
- An environmental review when real property transfers, which the SBA calls out specifically.
- Property tax history and any assessments coming.
Running the process
Hire an attorney and an accountant before the document flood starts. The SBA tells buyers to consider both, and law-firm checklists like Parr Business Law's run to nine categories of requests for a reason. Parr cites the 2026 Zenbooks Financial Clarity Index, which found 77.2 percent of Canadian business owners rate their finances good or excellent while only 43.5 percent actually score in that range. Owners believe their own numbers. Your job is to check them anyway.
Budget a diligence period of 30 to 90 days, the range Turley Law calls typical, inside a deal that most often closes 60 to 120 days after the LOI is signed. When the price is high enough that a five-figure accounting fee is small against what you stand to lose, a quality of earnings report from an independent accountant earns its keep.
Where Scouly fits
Scouly does layer one. Every company profile links its SBA loan history, PPP record, registry filing and local fragmentation, scored 0 to 100 on loan maturity, registry longevity and fragmentation. It never estimates revenue and it never will, because the records don't support it. Nothing on Scouly is listed for sale and it never contacts owners. Build a thesis for free and the pre-contact half of this checklist is done before your first letter goes out.
Frequently asked questions
What should a due diligence checklist for buying a small business include? Six document areas after a signed LOI, covering financials (statements, tax returns, bank records, debt), legal (contracts, licenses, liens, litigation), operations (vendors, systems, insurance), people (payroll, agreements, benefits), customers (concentration, contracts) and real estate (deed or lease, environmental). Before the LOI, public records cover existence, age, debt and approximate size for free.
How long does due diligence take on a small business purchase? Law firm guidance puts the due diligence period at 30 to 90 days, inside a deal that usually closes 60 to 120 days after the letter of intent is signed. Off-market deals often run longer because the owner has no broker assembling documents and may need weeks to locate tax returns, contracts and payroll records. Build that timeline and an exclusivity period into the LOI so the work is protected.
Can I find a business's revenue or profit in public records? No. No public dataset reports a private company's revenue, EBITDA or owner earnings. PPP records support a payroll and headcount estimate, and SBA loan sizes show what a bank once financed, but earnings only come from the seller's own statements and tax returns, which you verify after signing a letter of intent.
What are owner add-backs and why do they matter? Add-backs are expenses the seller adds back to profit on the theory a new owner won't pay them, like the owner's salary, personal vehicles or one-time costs. They can double reported earnings, and they're the most manipulated number in small business sales. Require documentation for every single adjustment before accepting the adjusted figure.
What does an SBA loan record tell me before I contact the owner? That a bank underwrote the business with real collateral and cash flow, when the debt originated, how large it was, and when it matures. A 504 loan usually means the company owns its building. A loan the seller later omits from the debt schedule is a red flag you could only catch because you checked first.
Do I need a lawyer and accountant for a small acquisition? Yes. The SBA tells buyers to consider hiring an attorney and an accountant once they have found a business, because the two together help create and evaluate the letter of intent, the contracts, the financial statements and the tax returns. The attorney handles the purchase agreement, lien searches and license transfers. The accountant ties returns to statements and tests the add-backs. On a larger deal, add an independent quality of earnings review.