How to Conduct Due Diligence for Purchasing Commercial Property

Due Diligence for Purchasing Commercial Property

Due diligence is not all about conducting background checks of a business to purchase it. There are several other situations in which due diligence is performed like private equity funding and purchase of real estate. It is more than a general investigation which involves specific elements based on the situation. When you purchase a commercial property, there are several factors required to be examined. Without conducting a proper due diligence of the property, you may face troubles.

To get the service done all you need to hire a third party due diligence service provider. They are considered a specialist in the service because they know their job responsibilities and have extensive experience in the field. Flexible plans are offered by them. You can choose the one that you find worthy. The best plan covers all the elements of diligence for the property so that you will face no problem in future.

The Best Plan Package Covers:

Environmental Concerns
When a commercial property is bought, it is must to examine the environmental related issues with the property. Does the land sit on a flood zone, active fault-line or protected from any environmental hazard? It is necessary to speculate the environmental related issues.

For any business, choose a right location plays an important role. It includes connectivity of the land with the prime roads. How much traffic will cross by the business location every day? Does it easy to enter and exit? Is the parking lot available?

Close Examining of the Building
Along with location evaluation, it is must to conduct an inspection of the building. A qualified building inspector is often appointed to inspect the building and its nearby areas. If there is any lien in the property, it is inspected by the diligence team. They are also responsible for confirming about any due payment detail of the contractors who worked on the property.

Code Compliance
To avoid unforeseen situations in future it is must that the building meets all the safety compliances. Confirmation on the matter is must before you finalize the property.

Performance Evaluation
Assessment of the current owner performance in this space is must to be examined. The diligence team tries to obtain the business profit or loss statements to tell you that how much beneficial the property can be for you.

Loan File Review and Legal Matters
Does the property still on loan? Does any legal issue related to it? These are two prime factors that get clearance before you finalize the commercial property.

Why Conduct Due Diligence While Buying A Business?

Conduct Due Diligence Process

Buying a business has lots of twists and turns. You need to go through various paper work and the last but not the least is to conduct due diligence. If the due diligence services are avoided, you may encounter with nasty surprises. It’s all because it is the process of evaluating a business situation from all aspects before finalizing the buying deal. The service is conducted after the intent to purchase documents have been signed but before the final agreement.

Due diligence is not a general investigation but it covers specific elements which may vary based on the situation. Here both parties are protected but it primarily protects the purchaser by uncovering the potential liabilities and any financial matter to ensure nothing is hidden.

The Subject matters it involves:

The subject is based on the situation, but most of the time it includes:

General Company Information
The history of the company is evaluated along with any succeeding business plans like short term and long term goals, any mission and objectives. It helps to know the how about of the organization and any potential risk.

Company Management Info
Who is the organization in charge? What are their credentials? How long are they working? Are they trustworthy or reliable? The employees, especially those who are in a prestigious position of the company are evaluated.

Legal Inquiries
The diligence service is considered incomplete till the legal structure of the business is conducted. The business legal structure may include copies of the articles of incorporation, copies of the contracts and agreements binding the organization, service agreement on the products and any product liability documents. It also involves discussion of the ongoing and pending litigations if any. Moreover, it needs to disclose the information about the company advisors of legal, financial and insurance. A background check is conducted on all the board members and top level executives. It needs to review the employment tax reports and status of the independent contractors.

Products & Services
If the organization sells products, the list of products is required to examine. The company competition status also needs to be reviewed. Pricing strategies, copyrights, trademarks and license of the company for selling the products are reviewed.

Who Help Conducting Due Diligence?
For this, an expert diligence team is outsourced. They are experienced and have profound knowledge in conducting diligence as per your requirements. Outsourcing the service saves time and money.

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