All of the deals featured on Loquidity undergo the company’s rigorous due diligence process, which allows investors to be assured that all of the investment opportunities offered are legitimate. To put it simply, due diligence is basically doing your homework. It is a vetting process of the sponsors (those who come to Loquidity with the deals) and can be broken down into three basic steps.
- Background check. This is the first step because it is the most important and can dictate the rest of the process. Criminal, background and credit checks are performed on the sponsor. It’s important to know if the sponsor has bad credit, a criminal record or has ever filed for bankruptcy. If the sponsor fails this part, Loquidity will not accept the deal.
- Establish a track record. It is vital to know the sponsor’s experience in the particular market in which they are offering a deal. We ask questions such as: Have they done these kinds of projects before? Do they have experience buying and selling property?
Property specific check. While a sponsor may check out, it is important to make sure that the offer is fundamentally sound. We look at the property type, the market in which it is, the history of the property, whether it needs a lot of work or not. We are trying to decide if this is a good deal. For example, if the equity deal is a 30-unit, multifamily property, Loquidity will look to see if the sponsor is raising too much and if the IRR (internal rate of return) is going to be worthwhile to put up on the platform.