Why the United States Small Business Administration (SBA) Requires Environmental Due Diligence In order to qualify for the SBA's guaranty for 7a and 504 loans, the SBA requires certain levels of Environmental Due Diligence be performed to provide assurance that the property value is not hampered by previous contamination or environmental degradation. Reasons for this would include:
The cost of remediation could impair the borrower's ability to repay the loan and/or continue to operate the business
The value and marketability of the property could be diminished
Lender or SBA could be liable for environmental cleanup costs and third-party damage claims arising from contamination
With certain property types being, or having been used by Environmental Sensitive Industries, the SBA requires the engagement of federal protection against Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) liability. They also require the engagement of an Environmental Firm's Error & Omissions Insurance to help protect the buyer, the lender and the SBA.
How the SBA Determines the Report Type The SBA requires an Environmental Investigation of all commercial property upon which security interest such as a mortgage, deed or trust, or leasehold deed of trust is offered as a security for a loan or debenture. The type and depth of an Environmental Investigation to be performed varies with the risk of contamination. The higher the risk for contamination the more in-depth study will be required. We have completed the environmental requirements for countless SBA loans throughout the State of Michigan. We provide exceptional service and the confidence that your work will be performed with speed and accuracy, utilizing the correct verbiage and report structure that satisfies the SBA Environmental Due Diligence requirements, and ensures timely closing of your loan.
