Some studies reduce a lender’s risk. Others merely launder the borrower’s optimism through a third party’s letterhead. The tells are consistent.
The structural red flags come first because they cannot be revised away. A consultant compensated on contingency or success has pre-decided the determination — whatever the document says. A study commissioned by and addressed solely to the borrower, with no acknowledgment of the lender’s reliance, was written for a different audience than the one bearing the risk. And an analyst unwilling to point to recent unfavorable determinations has a sample with no zeros in it, which is not how honest sampling works.
The document-level flags follow. Every assumption sourced to “management estimates.” A downside case that still beats the industry median. Identical boilerplate visible across asset types — the hotel study with the self-storage paragraph still in it. Expense ratios below every published benchmark with no explanation offered. Stabilized-only coverage reporting. A market area drawn to include whatever demand the pro forma needed.
Real projects have real risks, and a study that names none has made a choice. The professional standard runs the other way: every material risk stated plainly, each with its mitigation or its condition, because the lender’s reliance is only as good as the analysis’s candor. Program frameworks rely on independent analysis precisely for the information advocacy suppresses.
The remedy is procedural and cheap: lenders should confirm the engagement before work begins — whether the borrower or the institution initiates, each lender’s own rules govern — verify the fee structure in writing, and require the consultant’s determination history as part of selection. Independence verifies; it does not self-certify.
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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