When there is potential risk involved in a potential investment, a due diligence assessment is essential to the pre-funding commitment. The biggest investment a lender or creditor can make in a business is taking the time to determine the key aspects of the business environment, from the day-today operations practices, to human resource considerations, to the necessary practices to maintain customers.
A due diligence assessment provides the answers to these questions, allowing creditors and lenders to decide if they are willing to proceed given the existing factors. As such, it is a helpful tool in making a more informed credit or investment decision.
Due diligence assessments also provide information which can be used when crafting lending or investment instruments for the benefit of lending or investing entities. Although the structure of each engagement is unique, projects typically focus on answering the following questions.
- Market positioning – including competition, capabilities, market dynamics by segment.
- Execution capabilities – including strategy, management capabilities, cost structure, customer service, quality, product innovation.
- Attainability of business plan and projections
- Cash flow forecast, quality of earnings and debt service capabilities
Focus Management Group rapidly assesses a company to identify key issues and drives, drawing conclusions regarding the advisability of the lender/investor to proceed with the transaction under consideration.