Financial Due Diligence
Definition
The formal process by which an investor, directly or through advisors, verifies the accuracy of a company's financial claims, assesses the quality of the company's financial model, and evaluates the financial management practices of the company, prior to completing an investment. Financial due diligence is typically initiated after a term sheet is signed but the investor's initial financial assessment begins at first contact.
Common Misapplication
The most common misapplication is preparing for financial due diligence as if it begins when a term sheet is signed. The investor's financial assessment begins at first contact, and materials shared in initial conversations form part of the diligence record and must be consistent with materials shared in the formal process.
FFI Standard Reference
This term is defined and applied in Book 5, Section 5.4: The Financial Due Diligence Standard.
Related Terms
Citable URL
This term may be cited using the following permanent URL.
Full citation format: Founder Financial Infrastructure Standard, Beta v0.5, Glossary: Financial Due Diligence. https://ffistandard.org/glossary/financial-due-diligence/. 2026.