As part of the Small Business Administration’s environmental policy, there are certain types of due diligence products that require a Reliance Letter when submitted to the SBA. “It’s just a letter, how complicated could that be?” you might say, but this is one of the most common sources of issues for SBA lenders during environmental due diligence, so I think it bears a little discussion.
What is a Reliance Letter?
A Reliance Letter is used to convey the right to rely on a report to a particular party (someone other than the original user of the report). For example, a lender will engage an environmental professional to perform a Phase I Environmental Site Assessment, so the user is the lender and additional reliance may be granted to other parties, such as the SBA. Without this reliance, an additional party could perhaps review a report but would not be able to rely on it for their own due diligence or liability protection.
Many firms have their own templates for Reliance Letters. The SBA Reliance Letter is a specific SBA form to be filled out and signed by the environmental professional and the firm providing the report verifying that they meet the qualifications of an environmental professional as stated by the SBA. They also must indicate on the form whether they performed a Transaction Screen, Phase I Environmental Site Assessment, or Phase II Environmental Site Assessment, and that they are impartial to the property. The Reliance Letter has to be accompanied by evidence of the environmental professional’s or their firm’s insurance.
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