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Previous Issues
Issue 30: Loan Sale Premiums Hold Steady in November

Issue 29: Proper Risk Management Protection and Credit Worthiness

Issue 28: BoeFly Helps Veterans With Disabilities Connect With Lenders to Obtain Small Business Loans

Issue 27: Loan Sale Premiums Level off in October

Issue 26: SBA Secondary Market changes - Warranty Period and Premiums on New Larger Loans

Issue 25: BoeFly Surpasses the $1 Billion Transaction Mark

Issue 24: Loan Sale Premiums Continue Climb in September

Issue 23: Robert Tannenhauser, CEO of BoeFly, Interviewed by Michael McKee on Bloomberg Radio

Issue 22: Lender Optimism is up While Anxiously Awaiting the Small Business Jobs Bill

Issue 21: Loan Sale Premiums Blast to Record Highs in August

Issue 20: Title Insurance- the Lender's Perspective

Issue 19: Condemnation and Mortgage Lender's Rights

Issue 18: Long-Term Deals Continue Record Climb; Short-Term Deals Fade

Issue 17: Congressman Walt Minnick (D-Idaho) Gets It

Issue 16: Deeds and Forms of Ownership

Issue 15: SBA Loan Sale Premiums Hit Record High in June

Issue 14: What You Need to Know About Property Insurance

Issue 13: SBA Fixed Interest Rate Loans are an Important Product to have at the Ready

Issue 12: 504 Guaranteed Pool Program Summary and Survey Results

Issue 11: Loan Sale Premiums Surge to Record Highs in May

Issue 10: Environmental Risk for Lending Opportunities

Issue 9: How To Take Advantage of the First Lien Position 504 Loan Pool Guarantee Program

Issue 8: Investors Remain for SBA Loans

Issue 7: Retirement Funds for an Equity Injection - Selecting the Right Plan Provider

Issue 6: Why Outsourcing Environmental Risk Management makes Cents for Lenders

Issue 5: Loan Monitoring: Comfort in a Crisis

Issue 4: BoeFly Case Study: The economics of selling SBA guaranteed loans

Issue 3: BoeFly Lender Survey Results Q1 2010

Issue 2: Loan Sale Premiums Rally in Q1

Issue 1: The Importance of Efficiency in Secondary Markets

Environmental Risk for Lending Opportunities

Best practices to understand and manage risk

By BoeFly Member Gary Reynolds, Principal of Partner Engineering and Science


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An important risk all real estate lenders must consider is Environmental Risk. One way to manage risk is to have an Environmental Site Assessment (ESA) performed on the property. A phase 1 ESA provides a current and historical record search, as well as a site visit and inspection by a trained and certified Environmental Professional. The Environmental Professionals job is to provide you with a report of the property site that informs you that either the site is clean, or there are Recognized Environmental Conditions (REC’s) that exist.

Some identifiable risks would include, but are not limited to:

  • Leaking underground fuel or gas tanks that can contaminate soil and groundwater
  • Contamination from nearby industrial sites, accidental toxic spills or leaks
  • EPA and State top priority clean-up properties

In this tight credit environment, savvy business borrowers are increasingly taking the lead to identify the risks associated with their financing needs. Understanding the need for proper environmental due diligence at the onset can provide comfort and confidence for the borrower, knowing that he is not purchasing someone else’s contamination.

When engaging an Environmental Professional (EP) to perform an assessment you should consider the following:

  • Use a firm that provides a clear and concise professional opinion and doesn’t leave it up to you to interpret data
  • If an SBA loan, ask the EP if they used the required SBA language in their conclusion
    • If your financing is a loan through the SBA your EP must sign the SBA Reliance Letter (many lenders have called me saying they had a Phase I done by a firm but after the fact they wouldn’t sign the Reliance Letter – causing the lender to have to go out and engage another firm to perform the work again – and pay twice!)
  • Use a firm that has a minimum of $1,000,000.00 in liability protection (required on all SBA loans)
  • Only the AAI Phase 1 report has Federal Liability Protection under the CERCLA (Comprehensive Environmental Response, Compensation, and Liability Act) - innocent landowner defense. This provides protection from clean-up liability for pre-existing contamination if the owner conducted an AAI compliant phase 1 prior to the purchase, and no evidence of contamination was revealed.


View a sample third party Reliance Letter sent from the Environmental Professional to the SBA and the Lender