No federal guarantee means no federal rulebook — the study answers to the bank’s credit policy, and the coverage bar is typically higher.
Conventional commercial credits carry no SOP and no CFR part; they carry a credit policy, an internal loan committee, and — for projection-based deals — an examiner who will eventually read the file. The feasibility study for a conventional lender is therefore built to the bank’s own underwriting conventions, which in our practice typically means a 1.20x minimum debt service coverage ratio, stressed against the actual rate structure of the proposed facility rather than a program-standard assumption.
The analytical content does not relax because the guarantee is absent — it tightens. A guaranteed loss is shared; a conventional loss is the bank’s alone, and credit committees respond by demanding deeper stress work: rate shock from +0.5 to +3.0 percent on floating structures, revenue sensitivity at ±5, 10, and 15 percent, and break-even analysis identifying precisely where coverage crosses 1.0x.
Conventional lenders most often commission studies for special-purpose collateral, construction-to-permanent structures, and condominium or lot sell-outs — deals where repayment depends on absorption rather than stabilized rents. Sell-out analysis is its own discipline: the pro forma is a unit-by-unit absorption schedule, the debt repays from closings rather than operations, and the sensitivity that matters is pace, not price. Wert-Berater’s conventional practice includes sell-out engagements to $48,456,000 in optimized development cost.
A useful side effect: a project tested to conventional standards typically clears SBA and USDA coverage minimums with room to spare, which preserves the sponsor’s financing optionality if the capital plan changes mid-course.
President, Wert-Berater, Inc. — independent feasibility study consultants since 1998. More than 4,000 feasibility studies completed across all 50 states and internationally, evaluating $40.2 billion in project value for SBA, USDA, EB-5, conventional, and institutional financing decisions. Fiduciary duty runs to the lender and agency in every engagement.
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Schedule a ConversationIndependent feasibility studies since 1998 — 4,000+ engagements, $40.2 billion in evaluated project value. Standard delivery in 10 to 15 business days. Fiduciary duty to the lender and agency.