The 7(a) program’s flexibility is exactly what makes its projection-based credits demanding: when repayment rests on a forecast, the forecast must be independently tested.
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The 7(a) program finances nearly everything the 504 cannot — working capital, business acquisitions, partner buyouts, leasehold improvements, equipment — and that breadth is why its underwriting leans so heavily on cash-flow analysis. Where the borrower has years of tax returns demonstrating coverage, the lender’s own spread suffices. Where the loan is underwritten on projections — a start-up, a change of ownership where the buyer will operate differently, an expansion that doubles capacity — SOP 50 10 expects those projections to be supported by independent analysis.
The recurring failure mode in 7(a) feasibility work is the borrower-built pro forma dressed up with a market-report cover. An underwriter can spot it in minutes: revenue assumptions unanchored to a defined trade area, expense ratios below every published benchmark, and no ramp — the business opens at stabilization. An independent study replaces each of those with evidence: demand quantified from the actual market, expenses benchmarked against RMA and industry data, and a stabilization curve the operator must actually climb.
The program’s 1.15x operating and 1.00x global coverage minimums bind hardest in years one and two, not at stabilization — which is why a credible study presents the full ten-year pro forma with stress cases rather than a single blended year. Global coverage in particular catches what operating coverage hides: the guarantor whose personal obligations consume the cushion the business appears to have.
Wert-Berater has prepared more than 1,283 SBA-accepted studies since 1998. The engagement most often comes from the borrower — with lender confirmation obtained before work begins, since banks, lenders, and CDCs apply differing rules — the determination is independent — favorable or not — and the report is formatted for direct inclusion in the credit file with every assumption stated and sourced.
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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Wert-Berater, Inc. is an independent provider of feasibility studies and other related services. The firm does not provide financing or equity investment advice, and does not arrange, broker, or place debt or equity capital of any kind.
All appraisal assignments are performed by Bruce E. Jones, MAI, ASA-GC, BCA, CMEA, a member of the Appraisal Institute since 2006, a staff member of Wert-Berater, Inc. and owner of Special Purpose Realty Valuation.