To determine the debt structure, ask your sponsor if they’ve already secured debt financing. Alternatively, they may still be working on assumptions. If they are working on assumptions, be aware that the projected returns may change when the debt is secured. Another important factor to consider is the interest rate. Ask whether the interest rate is locked or floating, and if floating inquire if they purchased a cap. Remember that an increase in interest rates will reduce the return projections. Also be sure to ask whether the loan is short-term or long-term. Short-term loans have specific refinance assumptions, such as the interest rate and loan amount. Follow up with your sponsor on why these assumptions were made, and whether they can purchase an extension on a short-term loan.