For SBA lenders
Short answer
If a Phase I ESA identifies a REC but the environmental professional concludes no further action is necessary, the lender generally accepts the report. However, the lender must still document its environmental risk assessment based on the findings.
The SBA's environmental policies require lenders to conduct appropriate environmental due diligence. If an environmental professional determines a REC does not pose a significant risk or require remediation, the lender may proceed. However, the lender must ensure the report adequately justifies the "no further action" recommendation and document their own acceptance of that risk.
A Phase I ESA for a property financing a 7(a) loan notes a former dry cleaner nearby (a REC). The environmental consultant provides a detailed explanation why this poses no current threat to the subject property, concluding no Phase II is needed. The lender files this report and its rationale for proceeding.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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