Due diligence question bank

This is your working checklist for ABF due diligence. Whether you’re a capital provider preparing questions or an originator anticipating them, use this as your starting point and customize by asset class and deal specifics.

The questions are organized into five categories: asset, originator, structure/legal, operations, and sample file review. Each question is tagged by priority level so you know what to focus on when time is limited.

How to use this question bank

For capital providers

Start here, but don’t stop here. This question bank covers the core areas, but every deal has specific risks that require tailored questions. Use this as scaffolding.

Workflow:

Filter questions by priority (start with Critical, then Important)
Customize for asset class (consumer unsecured differs from equipment finance)
Document answers in a standardized diligence memo
Flag items requiring follow-up or third-party verification
Score each category and identify deal-breakers early

Timing matters. Ask the hard questions at term sheet stage, not two weeks before close. Capital providers who wait until documentation to surface issues lose leverage and waste time.

For originators

If you can’t answer these questions clearly, you’re not ready for institutional capital. Review this list before launching any capital raise.

Preparation checklist:

Assign ownership for each category (who can answer what)
Prepare supporting documentation in advance
Build a data room that anticipates these questions
Identify gaps and have a plan to address them
Rehearse answers with your team before lender meetings

Priority levels

Priority	Meaning	Impact
Critical	Must be answered satisfactorily	Deal stops if unresolved
Important	Material to terms and structure	May affect pricing or structure
Standard	Good practice	Unlikely to kill a deal

Asset-level diligence questions

These questions focus on the collateral itself: what are you buying, how does it perform, and can you trust the data?

Portfolio composition

Understanding what’s in the pool is foundational. You need to know the size, shape, and concentration of the portfolio before anything else.

#	Question	Priority	Notes
A-01	What is the total outstanding balance and loan count?	Critical	Get both current and historical (last 12 months)
A-02	What is the weighted average coupon (WAC)?	Critical	Compare to originator’s stated rates
A-03	What is the weighted average remaining term (WARM)?	Critical	Impacts duration and cash flow timing
A-04	What is the weighted average seasoning?	Important	Older loans are more predictable
A-05	What is the distribution by loan size?	Important	Look for unusual concentrations
A-06	What is the geographic distribution?	Important	State concentration affects regulatory risk
A-07	What is the vintage distribution?	Critical	Never rely on blended performance across vintages
A-08	What is the credit tier distribution (prime, near-prime, subprime)?	Critical	Must match stated credit box
A-09	What are the concentration limits (largest obligor, state, employer)?	Important	Single-name risk can kill a pool
A-10	How does the proposed pool compare to the originator’s total portfolio?	Important	Watch for adverse selection

Note: Request vintage-level stratifications for all key metrics. Blended statistics hide the trend. A 5% loss rate could be 3% on 2023 vintage and 8% on 2024 vintage.

Credit performance

Performance history is the best predictor of future losses. Get granular data and compare to benchmarks.

#	Question	Priority	Notes
A-11	What are the historical delinquency rates by bucket (30, 60, 90+ DPD)?	Critical	By vintage, not blended
A-12	What is the cumulative net loss rate by vintage?	Critical	Request loss curves
A-13	What is the recovery rate on charged-off loans?	Important	Affects loss severity
A-14	How do loss curves compare to third-party data (Kroll, S&P, peer benchmarks)?	Important	If no benchmark exists, dig deeper
A-15	What is the prepayment rate and its drivers?	Important	Impacts yield and duration
A-16	What is the modification rate and how are modified loans performing?	Important	High mod rates may mask delinquency
A-17	What are the roll rates by delinquency bucket?	Critical	Predicts future charge-offs
A-18	How did the portfolio perform during COVID or other stress periods?	Important	Reveals stress resilience
A-19	What is the distribution of loss by reason (default, fraud, skip)?	Important	High fraud losses are a red flag
A-20	Are there any cohorts with anomalous performance (better or worse)?	Standard	If yes, understand why

Worked Example: Loss Curve Analysis

You’re evaluating a consumer lender with the following vintage data:

Vintage	UPB at Origination	Cumulative NCL at 12mo	Cumulative NCL at 24mo
Q1 2023	$50M	2.1%	4.8%
Q2 2023	$65M	2.4%	5.5%
Q3 2023	$80M	3.2%	7.1%
Q4 2023	$95M	3.8%	(not yet mature)
Q1 2024	$110M	4.5%	(not yet mature)

What this tells you: losses are increasing with each vintage as the originator scaled. The Q1 2024 vintage is tracking 50% worse than Q1 2023 at the same point in its life. This is a credit deterioration story, not a seasonal effect. Your follow-up questions should focus on what changed in underwriting or sourcing.

Underwriting and origination

How loans get made determines how they perform. Understand the process, the standards, and the exceptions.

#	Question	Priority	Notes
A-21	What is the credit box (FICO range, DTI limits, income requirements)?	Critical	Get the current policy document
A-22	How has the credit box evolved over the last 24 months?	Critical	Tightening or loosening?
A-23	What is the exception rate (loans approved outside credit box)?	Critical	>5% is a yellow flag, >10% is a red flag
A-24	Who can approve exceptions and what is the approval process?	Important	Watch for single-person override authority
A-25	What verification is performed (income, employment, identity)?	Critical	Varies dramatically by asset class
A-26	Is income verification performed on all loans or only above a threshold?	Critical	No-doc loans perform worse
A-27	What is the fraud detection process at origination?	Important	Include vendor names and fraud rates
A-28	What is the rejection rate and what are the primary reasons?	Standard	Low rejection rates suggest loose standards
A-29	What is the loan-to-value or advance rate distribution?	Critical	For secured assets only
A-30	Are there any channel-specific differences in underwriting (direct vs. broker vs. partner)?	Important	Partner channels often have higher risk

Important: An originator who can’t produce their credit policy document in 24 hours is either disorganized or hiding something. Either way, that’s a problem.

Loan-level data quality

Data quality determines whether you can monitor the portfolio and enforce your triggers. Bad data kills deals.

#	Question	Priority	Notes
A-31	Can a full loan-level tape be produced within 48 hours?	Critical	Test this during diligence
A-32	What fields are available on the tape?	Critical	Compare to your minimum requirements
A-33	Is there a unique loan ID that ties across all systems?	Critical	Reconciliation depends on this
A-34	How are data corrections handled when errors are found?	Important	Look for audit trail
A-35	Has a third-party data audit been performed?	Standard	If yes, request the report
A-36	What is the data error rate by field (missing, invalid, out of range)?	Important	Critical fields should be >99% complete
A-37	Can historical tapes be provided for trend analysis?	Important	Monthly snapshots for last 12+ months
A-38	Is there loan-level performance history (payment by payment)?	Standard	Needed for detailed modeling
A-39	How quickly can ad-hoc data requests be fulfilled?	Standard	Tests operational capability
A-40	Are there any known data issues or reconciliation gaps?	Critical	Ask directly; some will disclose

Originator-level diligence questions

You’re not just buying assets; you’re partnering with a company. Originator risk is often the dominant risk in ABF transactions.

Business and strategy

Understand the business model, competitive position, and growth trajectory. A business that can’t survive doesn’t produce quality assets.

#	Question	Priority	Notes
O-01	What is the company history and how long has it been originating?	Critical	<3 years is early stage
O-02	What is the origination volume by quarter for the last 12 quarters?	Critical	Look for growth rate and consistency
O-03	What is the growth plan for the next 12-24 months?	Important	Is it realistic and funded?
O-04	Who are the key competitors and how does the product differ?	Important	Sustainable differentiation matters
O-05	What is the customer acquisition cost (CAC)?	Important	By channel if multiple
O-06	What is the unit economics (revenue per loan, cost to originate, lifetime value)?	Critical	Must be profitable at scale
O-07	What is the customer retention or repeat rate?	Standard	Indicates product-market fit
O-08	What is the revenue breakdown (interest, fees, servicing)?	Important	Fee income volatility differs from interest income
O-09	Is the originator dependent on any single channel or partner?	Critical	Partner concentration is a risk
O-10	What is the technology stack and key vendor dependencies?	Standard	Vendor failure can disrupt operations

Financial condition

An originator with weak financials is a counterparty risk. Understand their capital position and runway.

#	Question	Priority	Notes
O-11	Can audited financials be provided for the last 2-3 years?	Critical	Unaudited is a red flag for >$20M originator
O-12	What is the current cash runway without additional funding?	Critical	<6 months is a problem
O-13	What is the capitalization structure (equity raised, existing debt)?	Critical	Get the full cap table
O-14	What is the all-in cost of existing debt facilities?	Important	Your deal needs to fit the stack
O-15	What is the profitability by vintage or channel?	Important	Aggregate profitability can mask problems
O-16	What are the largest operating expenses and how do they scale?	Standard	Variable vs. fixed cost structure
O-17	Are there any contingent liabilities or pending litigation?	Critical	Request disclosure schedule
O-18	What is the servicing income on the existing portfolio?	Important	Servicing cash flow provides stability
O-19	What is the intercompany debt or affiliate relationship structure?	Important	Watch for upstream cash extraction
O-20	What is the minimum liquidity or tangible net worth covenant compliance?	Important	If existing covenants exist

Worked Example: Cash Runway Analysis

An originator provides the following:

Monthly cash burn: $800K
Current cash on balance sheet: $3.2M
Expected equity close: $5M in 60 days (not closed)
Monthly origination: $12M
Warehouse utilization: 85% of $50M facility

Your assessment: 4-month cash runway based on current cash, but dependent on an uncommitted equity raise. If the equity doesn’t close, they’ll need to slow originations to preserve cash. At 85% warehouse utilization, they’re also approaching capacity constraints. This originator has tight liquidity and execution risk on their equity raise.

Your follow-up: What happens to operations if the equity raise is delayed by 90 days?

Management and governance

People matter. Understand who runs the company and whether they can execute.

#	Question	Priority	Notes
O-21	Who are the key executives and what is their background?	Critical	Request resumes and LinkedIn profiles
O-22	How long has the current management team been in place?	Important	High turnover is a warning sign
O-23	What is the board composition and governance structure?	Important	Independent directors matter
O-24	What is the equity ownership structure?	Critical	Founder ownership affects incentives
O-25	Is there key person risk and how is it mitigated?	Critical	Single-person dependency is real
O-26	What is the employee turnover rate in critical functions (collections, underwriting, ops)?	Important	High turnover degrades performance
O-27	What is the compensation structure for executives and originators?	Standard	Incentives drive behavior
O-28	Are there any related-party transactions?	Important	Require disclosure
O-29	What is the D&O insurance coverage?	Standard	Inadequate coverage is a governance failure
O-30	Has any executive been involved in a bankruptcy, fraud investigation, or regulatory action?	Critical	Background checks are essential

Regulatory and compliance

Regulatory risk can be existential. Understand the licensing, compliance infrastructure, and any pending matters.

#	Question	Priority	Notes
O-31	What licenses does the originator hold and in what states?	Critical	Request full license list
O-32	Is there a bank partnership and what are its terms?	Critical	Bank partner dependency is a concentration risk
O-33	Has the company received any regulatory inquiries or enforcement actions?	Critical	Include state and federal
O-34	What is the compliance infrastructure (compliance officer, audit function, training)?	Important	Named compliance officer required
O-35	When was the last compliance audit and what were the findings?	Important	Request the report
O-36	Are there any pending regulatory matters or expected changes?	Critical	Include CFPB, state AGs, licensing
O-37	What is the process for ensuring ongoing licensing compliance?	Standard	Renewal tracking matters
O-38	How are consumer complaints handled and tracked?	Important	CFPB complaint volume is public
O-39	Is there a fair lending program and when was it last tested?	Important	Required for consumer lenders
O-40	What is the UDAP/UDAAP compliance framework?	Important	Enforcement risk is high in this area

Note: Search the NMLS Consumer Access database and state regulator websites for any enforcement actions. Originators don’t always disclose these voluntarily.

Structure and legal questions

These questions address how the deal is structured and the legal protections in place for capital providers.

Facility structure

Confirm your understanding of the proposed terms and identify any unusual provisions.

#	Question	Priority	Notes
S-01	What is the proposed facility size and expected utilization?	Critical	Minimum utilization matters for economics
S-02	What is the proposed advance rate by collateral type?	Critical	Compare to market benchmarks
S-03	What is the proposed pricing (spread, SOFR floor, fees)?	Critical	All-in cost of capital
S-04	What is the facility term and revolving period length?	Critical	Match to asset duration
S-05	What is the ramp-up timeline and any minimum draw requirements?	Important	Affects yield during ramp
S-06	What triggers and covenants are proposed?	Critical	Compare to your standard package
S-07	Are there performance triggers (delinquency, loss, dilution)?	Critical	What are the trip levels and consequences?
S-08	What is the cure mechanism for covenant breaches?	Important	Equity cure rights?
S-09	Is there a borrowing base or asset coverage test?	Critical	Calculation methodology matters
S-10	What is the amortization period length after revolving period ends?	Important	Affects terminal risk

SPV and bankruptcy remoteness

The SPV structure is your bankruptcy protection. Verify it’s properly established and maintained.

#	Question	Priority	Notes
S-11	Is a new SPV required or can an existing entity be used?	Important	Existing SPVs have history to review
S-12	What is the SPV jurisdiction and organizational structure?	Important	Delaware LLC is standard
S-13	Who are the members/owners of the SPV?	Critical	Ownership structure affects consolidation risk
S-14	Are there any substantive consolidation risks?	Critical	Get legal analysis
S-15	Who are the independent directors/managers and what are their qualifications?	Important	Professional independents preferred
S-16	Are separateness covenants in place?	Critical	Standard provisions for BR remoteness
S-17	Is a true sale opinion required and who provides it?	Important	Law firm reputation matters
S-18	Is a bankruptcy remoteness opinion required?	Critical	Standard for rated deals
S-19	What are the SPV’s organizational documents and when were they last updated?	Standard	Request copies
S-20	Are there any other claims on the SPV (other facilities, intercompany loans)?	Critical	SPV should be clean

Security and perfection

If things go wrong, your security interest is what protects you. Verify perfection and priority.

#	Question	Priority	Notes
S-21	What collateral is being pledged?	Critical	Receivables, bank accounts, other assets
S-22	How will security interests be perfected (UCC, account control agreements)?	Critical	Perfection method by collateral type
S-23	Are there any prior liens or competing security interests?	Critical	UCC searches required
S-24	What is the chain of title from origination to SPV?	Critical	Assignment documentation
S-25	Is the collateral agent satisfactory?	Important	Reputation and capability
S-26	Are control agreements in place for all deposit accounts?	Critical	Blocking notice capability
S-27	Is there physical collateral and how is possession managed?	Important	For equipment, auto, titled assets
S-28	Are there any obligor notification requirements for true sale?	Important	Depends on jurisdiction
S-29	What is the process for releasing collateral upon payoff?	Standard	Operational procedure
S-30	Is there a backup servicer requirement?	Important	Successor servicing protection

Legal documentation

Understand the document structure and negotiation process.

#	Question	Priority	Notes
S-31	What documents will be required (credit agreement, security agreement, servicing agreement, etc.)?	Critical	Full document list
S-32	Who is drafting and who is reviewing?	Standard	Outside counsel for both sides
S-33	What is the expected timeline from term sheet to close?	Important	Realistic expectation setting
S-34	Are there any unusual or non-standard provisions proposed?	Important	Flag early
S-35	What reps and warranties will be required at asset and originator level?	Critical	Breadth and survival period
S-36	What are the rep breach remedies (repurchase, indemnity, facility termination)?	Critical	Enforcement mechanism
S-37	What ongoing reporting covenants will be required?	Important	Monthly, quarterly, annual
S-38	What are the events of default and grace periods?	Critical	Standard vs. non-standard
S-39	What are the remedies upon default?	Critical	Acceleration, enforcement rights
S-40	Is there a rating agency requirement (shadow rating, public rating)?	Important	Adds timeline and cost

Operational and servicing questions

Operations determine whether assets perform as expected. Poor servicing turns good collateral into bad collateral.

Servicing capabilities

Understand how the portfolio is serviced day-to-day.

#	Question	Priority	Notes
P-01	Is servicing in-house or outsourced?	Critical	If outsourced, who and what terms
P-02	What is the servicing platform and how long has it been in use?	Critical	Platform stability matters
P-03	What is the staffing level relative to portfolio size?	Important	Accounts per collector, etc.
P-04	What is the servicing fee structure?	Important	Embedded in yield or explicit
P-05	What is the delinquency management process?	Critical	Contact strategy and timing
P-06	How are modifications and hardship programs handled?	Important	Modification authority and limits
P-07	What is the escalation process for seriously delinquent accounts?	Important	At what point does strategy change
P-08	Is there a quality assurance program for servicing?	Standard	Call monitoring, file reviews
P-09	What servicing audits have been performed (SSAE 18, regulatory, etc.)?	Important	Request reports
P-10	What is the capacity for growth (can servicing scale with origination)?	Important	Scaling plan

Collections and recovery

When loans go bad, collections and recovery determine your actual loss.

#	Question	Priority	Notes
P-11	What is the collections strategy (in-house, agency, legal)?	Critical	By delinquency stage
P-12	What are the recovery rates by delinquency bucket?	Critical	30, 60, 90+, charge-off
P-13	How are charge-off decisions made and what is the timeline?	Important	Policy vs. practice
P-14	What agencies are used for third-party collections?	Standard	Names and contingency rates
P-15	Is there a deficiency collection program?	Standard	Post charge-off recovery
P-16	What is the fraud detection and response process post-origination?	Important	Early fraud detection matters
P-17	What is the litigation strategy for delinquent accounts?	Standard	Threshold for legal action
P-18	For secured assets, what is the repossession/foreclosure process?	Critical	Timeline and cost
P-19	What is the asset disposition process (remarketing, auction, wholesale)?	Important	For secured assets
P-20	How are recovery proceeds allocated between parties?	Important	Sharing agreements

Worked Example: Recovery Rate Analysis

You receive the following recovery data from a consumer lender:

Charge-off Vintage	Gross Charge-offs	Recoveries to Date	Recovery Rate
Q1 2023	$2.1M	$0.41M	19.5%
Q2 2023	$2.8M	$0.50M	17.9%
Q3 2023	$3.5M	$0.45M	12.9%
Q4 2023	$4.2M	$0.38M	9.0%

Illustrative pricing. See pricing disclaimer.

What this tells you: recovery rates are declining as charge-off volume increases. This could indicate (a) collection capacity constraints, (b) changing mix of charge-off reasons, or (c) reduced collection effort as the team is overwhelmed. Your follow-up should ask about collection staffing changes and reason code distribution.

Reporting and technology

Can the originator produce accurate reports on time? This determines your ability to monitor the facility.

#	Question	Priority	Notes
P-21	What monthly reports are produced and what is the timeline?	Critical	Days after month-end
P-22	Can loan-level data be delivered in standard formats (CSV, Excel, XML)?	Critical	Compatibility with your systems
P-23	Is there API access to servicing system data?	Standard	For real-time monitoring
P-24	What is the disaster recovery and business continuity plan?	Important	RTO and RPO targets
P-25	When was the last DR test performed?	Standard	Test results available
P-26	How is data security maintained (encryption, access controls)?	Important	SOC 2 or equivalent
P-27	What is the change management process for servicing system updates?	Standard	Testing and rollback procedures
P-28	Are there any known system limitations or workarounds?	Important	Excel as shadow system is a red flag
P-29	What is the reconciliation process between servicing and accounting systems?	Important	Daily, weekly, monthly
P-30	Can borrowing base calculations be independently verified?	Critical	Audit rights

Backup servicing

If the originator fails, backup servicing keeps the portfolio performing.

#	Question	Priority	Notes
P-31	Is a backup servicer in place or required?	Critical	Hot, warm, or cold backup
P-32	Who is the backup servicer and what is their experience?	Important	Prior transfers in this asset class
P-33	What is the backup servicer’s access to systems and data?	Important	Real-time vs. periodic
P-34	What is the estimated transition timeline if backup is activated?	Critical	30, 60, 90 days
P-35	Has a servicing transition drill been conducted?	Standard	When and results
P-36	What are the backup servicer fees (standby and active)?	Important	Passed through or absorbed
P-37	What are the termination triggers for the primary servicer?	Critical	Performance, financial, operational
P-38	Who has authority to activate the backup servicer?	Critical	Capital provider or trustee
P-39	What is the backup servicer’s capacity to take on this portfolio?	Important	Bandwidth constraints
P-40	Is there a servicing transfer agreement in place?	Critical	Documented process

Sample file review protocol

Summary statistics can mask underlying problems. Always pull files. A 50-100 loan sample review is standard practice and non-negotiable.

Sample selection

Design your sample to stress-test the data, not confirm it.

Selection criteria:

Random selection (not cherry-picked by the originator)
Stratified by vintage (include each of the last 8-12 quarters)
Include credit tier distribution matching the pool
Geographic representation
Include performing and delinquent loans
Include any modified loans
Include exception loans (outside credit box)

Sample size by portfolio:

Portfolio Size	Minimum Sample
<500 loans	30 loans
500-2,000 loans	50 loans
2,000-10,000 loans	75 loans
>10,000 loans	100 loans

Document checklist (per loan)

Every file should contain the following (adjust by asset class):

Document	Required	Notes
Signed loan agreement/promissory note	Yes	Wet or e-signature
Identity verification (KYC documentation)	Yes	ID copies, SSN verification
Income verification	If applicable	Pay stubs, tax returns, bank statements
Employment verification	If applicable	Verbal VOE or documentation
Credit report at origination	Yes	Score and tradelines
Underwriting notes or decision rationale	Yes	Automated decision or manual
Payment history	Yes	Should match tape
Modification documentation	If applicable	Agreement and approval
Collateral documentation	If secured	Title, UCC, etc.

Review criteria

For each file, evaluate:

Criterion	What You’re Checking
Data accuracy	Does documentation match data tape fields?
Underwriting compliance	Were guidelines followed? Was exception approved?
Completeness	Are all required documents present?
Signature validity	Proper execution and dating?
Chain of custody	Clear assignment trail?
Regulatory compliance	Required disclosures included?

Scoring and findings

Per-loan scoring:

Pass: File complete, no issues
Minor exception: Small documentation gap, no credit concern
Major exception: Material underwriting deviation or missing critical documentation
Fail: Documentation insufficient to enforce the loan

Aggregate thresholds:

Finding Rate	Assessment
<5% major exceptions	Acceptable
5-10% major exceptions	Concerns, may require rep breach remedies
>10% major exceptions	Serious concerns, may be deal-breaker
>15% major exceptions	Walk away

Illustrative pricing. See pricing disclaimer.

Sample file review memo format

Document findings in a standardized format:

SAMPLE FILE REVIEW FINDINGS

Pool: [Pool Name/Cutoff Date]
Sample Size: [X] loans
Review Date: [Date]
Reviewer: [Name]

SUMMARY
- Total files reviewed: X
- Pass: X (X%)
- Minor exceptions: X (X%)
- Major exceptions: X (X%)
- Fails: X (X%)

FINDINGS BY CATEGORY
1. Documentation gaps: X findings
   - Missing income verification: X loans
   - Missing signed agreement: X loans
   - [etc.]

2. Underwriting exceptions: X findings
   - FICO below policy minimum: X loans
   - DTI above policy maximum: X loans
   - [etc.]

3. Data mismatches: X findings
   - Loan amount discrepancy: X loans
   - Rate discrepancy: X loans
   - [etc.]

RECOMMENDATION
[ ] Proceed
[ ] Proceed with conditions (specify)
[ ] Do not proceed

CONDITIONS (if applicable):
1. [Condition]
2. [Condition]

Important: Sample file review is not optional. If an originator pushes back on file review, that’s a major red flag. The question is: what are they hiding? Sophisticated capital providers always pull files.

Cross-references

Your Loan Tape: What Lenders Actually Look At — how this question bank fits into the overall process
Term Sheet Anatomy — questions that should be answered before signing
Deal Autopsy — what happens when diligence is inadequate
Term Sheet Anatomy — deeper dive on how servicing standards appear in transaction documents
ABF Glossary — terminology definitions

Appendix: question export

Use this simplified checklist format for working sessions. Copy and customize for your deal.

Critical questions checklist

Asset:

Originator:

Structure:

Operations: