SBA 7(a) Q&A
Short answer
For raw land, environmental due diligence typically involves a Phase I Environmental Site Assessment (ESA) to identify potential contamination risks, as required by SBA policy.
SBA policy (SOP 50 10) mandates appropriate environmental due diligence for real estate collateral. For raw land, especially if it has a history of commercial or industrial use, a Phase I ESA is generally required. This assessment identifies recognized environmental conditions (RECs) that could pose a risk to the collateral's value or the borrower's ability to repay.
If you're buying a piece of raw land for $300,000 to eventually build a warehouse, the lender will likely require a Phase I ESA before loan approval. If the Phase I identifies potential contamination, further investigation (e.g., Phase II ESA) may be necessary.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-14. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-14 · SBA sources checked through 2026-06-14. 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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