Fundraising Financial Diligence Checklist

Page one for this query is a document inventory, not a test. Dealroom's financial due diligence template lists normalizing EBITDA and adding back one-time expenses as tasks to complete, with no step that checks whether this year's non-recurring label also applied last year. Data Room Builder's financial diligence checklist template gives a folder index, Historical Financials, Revenue, Working Capital, Debt, with a notes column and nothing that reconciles one year's add-backs against the next. Drooms' fundraising-specific version is the same folder list aimed at a round instead of a sale, with an identical gap.

Cotter Analytics, Inc., an illustrative software company, shows the gap. Its deck reports Adjusted EBITDA of $(1,100,000): a GAAP operating loss of $(4,610,000) plus $3,510,000 of add-backs, including $420,000 labeled strategic initiatives. The same ledger account carried $395,000 last year as product exploration and $380,000 the year before as innovation lab. Three years of a similarly sized charge under three names is not an event. It fails the two-year look-back the SEC's Non-GAAP guidance applies to its filers, the same scope question a quality of earnings report review is built to catch.

Two adjustments the deck never carries close the gap. Cotter's headquarters rent runs $185,000 a year to the CTO's company against a $340,000 market midpoint, and a below-market rate inflates earnings as an above-market one would. That is why a credit agreement's affiliate-transactions covenant tests both directions, arm's length or restated. Add a $195,000 reserve against a bankrupt customer's receivable and recomputed Adjusted EBITDA is $(1,870,000), $370,000 past the stapled facility's $(1,500,000) covenant floor. That gap is raised before signing, not caught later by a lender covenant reporting pack or a covenant headroom forecast.