Sponsor diligence evidence coverage calculator

It answers how much of what a sponsor has told you has been confirmed by evidence the sponsor did not write, and how much weight is still open.

Formulas

• Coverage = sum of weights of verified items / sum of all weights (total weight 29)
• Weights reflect how much each item narrows the risk of relying on the sponsor’s own claims
• A high score shows how much of the sponsor’s story has been checked, not that the deal is sound

Worked example with the starting inputs

With the starting inputs in the form (track record verified from independent records (weight 3, enter 1 for yes, 0 for no) 1; prior investor references called (weight 3) 1; litigation and lien search complete (weight 3) 0; sponsor financial statements reviewed (weight 2) 1; bank references obtained (weight 2) 0; property ownership and title verified (weight 2) 1; reserve and liquidity evidence seen (weight 3) 0; insurance coverage confirmed (weight 1) 1; organizational documents reviewed (weight 2) 1; fees and compensation disclosed in writing (weight 3) 1; sponsor co-investment confirmed (weight 3) 0; past reporting to investors reviewed (weight 2) 0), the results are: weighted evidence coverage: 55.2 percent; items verified: 7; items still open: 5; weight still open: 13.

These inputs are hypothetical and are shown only so the arithmetic can be checked by hand.

What the coverage score means in a live deal

The open remainder is where the sponsor’s word still carries the load.

Each item maps to a document or a party you can name. Track record comes from closing statements and recorded deeds that the sponsor did not write. Investor references mean calling prior limited partners directly. Litigation and lien searches run through court dockets and county records. Reserve and liquidity evidence means bank statements, which matters because a loan agreement often imposes a liquidity covenant on the guarantor. Fees and compensation belong in the term sheet and the operating agreement in writing. As these items close, the cap rate and debt service coverage in the sponsor’s underwriting rest on a history that has been tested, and the open weight shows where to press next.

How to read and stress the coverage result

Read the four outputs together.

Where the coverage score misleads

A high score measures how much has been checked.

The inputs are binary, so a partial reference check or a lien search that covered one county scores the same as a full one. The weights are a judgment about how much each item narrows reliance on the sponsor’s claims, and a different limited partner might weight them differently. A clean lien search describes one moment, and bank statements go stale quickly. Lenders also run their own checks, including guarantor net worth and liquidity tests written into the loan agreement, and an appraiser values the property separately. Passing the lender’s requirements and completing this list are different exercises, and neither replaces your own underwriting of the business plan.