Rate stress only means something when it is applied to the facility the borrower will actually sign — tranche by tranche, reset by reset.
A blanket “+200bps” line in a pro forma footnote is not stress testing. The real exercise maps the proposed capital structure first: which tranches float and against what index, when fixed periods reset, where balloons mature, and what portion of total debt service each tranche represents. An SBA 504 structure — fixed debenture behind a bank first that may float — behaves entirely differently under rate stress than a single floating conventional note, and the study must model the structure, not a generic loan.
Wert-Berater applies rate stress from +0.5 to +3.0 percent in steps against the actual structure across the full ten-year pro forma, reporting the coverage curve at each step. The +3.0 case is not alarmism; it is the historical record — tightening cycles of that magnitude have occurred within ordinary careers, and a project that only works at the bottom of the rate cycle is a timing bet, not a credit.
For structures with balloons, the binding rate test is the refinance: can the stabilized NOI support a takeout facility at stressed rates and then-current underwriting standards? A project that covers comfortably at the construction loan’s teaser pricing but cannot refinance at +250bps has a maturity-date problem the committee should see in year zero. The study runs the takeout test explicitly — stressed rate, market amortization, the refinancing lender’s coverage minimum — and states the margin.
Where the margin is thin, the report says so plainly and identifies the structural cures: longer fixed periods, faster amortization on the floating tranche, or a rate-cap requirement carried as a condition precedent.
President, Wert-Berater, Inc. — independent feasibility study consultants since 1998. 4,000+ engagements completed across all 50 states and internationally, evaluating $41.2 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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