5 Questions to Ask Before Investing in a Private Deal

Before committing capital, smart investors ask the right questions. Here are five essential ones:

1. Who is the sponsor and what is their track record?
Past performance is not a guarantee, but experience matters.

2. What is the business plan?
Understand how the sponsor intends to add value, generate cash flow, or create an exit.

3. How is the deal structured?
Review preferred returns, equity splits, fees, and timelines.

4. What are the risks?
Every deal carries risks: market shifts, vacancy, operational issues, etc. Sponsors should acknowledge and plan for these.

5. What are the exit strategies?
Know how and when you may see your money back—sale, refinance, merger, etc.

Takeaway
Asking these five questions provides clarity, builds trust, and helps you avoid surprises down the road.