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Due Dilligence

  • Entrihub chats to Khanya Okumu, Enterprise and Supplier Development Specialist. Khanya talks about what due diligence entails.

    Question 1: What does due diligence entail?

    Khanya: A due diligence is basically a review of the business. For example, I have submitted an application to buy a business and I need funding for it and why buying this business makes sense is it's creating jobs, it's in a key sector so call it manufacturing and it meets the DFI's requirements. Effectively what the due diligence does is the team comes out to the business and does an entire review to try and understand what it is that that the business does and also to assess the level of funding that's needed but effectively it's for the funders to understand the business. If you look at a set of financial statements with a lot of different components in them you look at the assets on the balance sheet. The funders need to understand the quality and adequacy of the machinery in the business. They need to understand from accounts receivable who are the debtors and creditors of this business. From a contract review, a point of view they're also looking at where is this business situated, the lease agreements in place if this particular funding request is for contract finance. There's a legal review that forms part of the due diligence so it encompasses everything from a financial review to a legal review. Then compliance parts as well where it's important to understand the standing of the business from a BEE point of view from compliance with the CIPC. All of those different things form part of due diligence.