The Ancient, Priceless, Secret Value of "Free"!

Some people quickly dismiss the value of "free". We've all heard the trite cliche': "You get what you pay for!"  

These folks are the unfortunate few who don't yet understand the immeasurable value of "free".  They don't know what they are missing!

The original "free" business model goes back about 2000 years. The reason that our modern calendar says 2015 today is because something of immeasurable value was offered for "free" to a worldwide audience, and then that promise was kept.

Few would disagree that this single, most monumental transaction of all time - which was based on nothing more than a promise - has changed the world in immeasurable ways.

The secret is trust.

At worst, the items of value actually exchanged in this deal are trust, traded freely for two other priceless gifts: peace of mind and better behavior, at least to some degree.

At best? Trust exchanged for an even better priceless gift: eternal life.  So that's a pretty good upside, with a very limited down side, don't you think?

That's what we like to call a "win-win"!

Of course, since it has been so successful (2015 years of solid referrals - and counting!), this model has been adapted into other areas of life, including business. 

Wildly successful modern examples of the "free" business model include Google, Facebook, Internet Explorer, and the universal phenomenon of the "free trial version" of software products, including LinkedIn.

Blinds.com offers a "Fit or Free" business model, to build trust in the buyer so that they know they can buy with confidence.  It is also wildly successful.

Banks offer free checking, free savings, free pens, free suckers. Why? To demonstrate their trustworthiness in a tangible way.

There is not a business in the US today which could not benefit from demonstrating additional trust in the minds of it's customers, and the value of free is arguably the most successful model in history for doing this.  There is nothing else like it.

We recently changed the way we do business to harness this power as well. Our new business model "puts our money where our mouth is", as my mom used to say (she still says that!). Because we believe in the value of what we do, our company eagerly embraces this business model.  We are willing to do what others aren't, and that's why we bring greater value than they do.

And that original free offer from 2000 years ago? It's still just as valuable today as it was then. Something worth checking into!

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Nutshell: SBA Environmental Procedures/Policies and Tools For Lenders & CDC's

We sometimes get asked about the SBA environmental requirements for 504 and 7(a) loans.  The SBA's most recent policy is long, and can take some time to go through. The USDA Rural Development Program employs a similar policy. To help, we've put together a quick overview of how this works, along with links to a few helpful resources.  Here we go.

1)  Regardless of the it's SBA program designation, is the loan secured with commercial real estate?

• Might seem basic, but if this is the case, then some level of environmental due diligence is required.

2) Is the real estate collateral’s current or past use listed on the SBA's "environmentally sensitive industries list"?

• If no, proceed with the minimum step for that loan size. (See below)
• If yes, you must begin with a Phase I environmental study. The report must be submitted to and approved by the SBA prior to loan disbursement (PLP/Express lenders can use delegated authority).

3) Is the loan <$150,000? If yes, and the real estate collateral is not identified as environmentally sensitive according to it's NAICS code, you may begin with an Environmental Questionnaire.

4) If the loan is >$150,000 and not identified on the list of sensitive industries, you must begin with a Records Search with Risk Assessment (RSRA).  (Note:  you should still have the current property owner complete an Environmental Questionnaire on the subject property!)

5) The RSRA will have one of two possible outcomes:

•  "Low Risk: No further action required".  At this point, simply send a copy of the report to SBA underwriting for concurrence (PLP/Express lenders can use delegated authority).
• Elevated/High Risk: Phase I Recommended". The lender/CDC must follow this recommendation before submitting to SBA.

This Phase I upsell can be a real or perceived hidden "conflict of interest" zone as I have written about before. Is the Phase I really needed?  Maybe.....or maybe it is a very nice upsell for the consultant who could have resolved the matter with just a little more effort.  How can you possibly know for sure?  Even if the cost of the RSRA is applied to the Phase I, it's still a nice upsell, isn't it?

• There's only one way to know for sure: from the get-go, make sure that the consultant who does your RSRA's has no possibility of profiting from any upsell.  That means hiring a consultant for your RSRA who uses a business model which eliminates this possibility.  Every environmental firm which performs RSRA's counts on the revenue from this Phase I upsell.  Most firms essentially treat the RSRA as a loss-leader.  

• There is currently only one company in the environmental industry which has developed a business model which inherently eliminates this serious, yet hidden conflict of interest.  Learn more here.

• It is important for SBA and USDA lenders to follow these steps carefully.

It's also important to recognize that these steps are primarily for risk valuation for the collateral, for the lender's and guarantor's benefit. 

Order your EZ Screen now.

There is also some benefit to the borrower: peace of mind.  While it may not be a full Phase I, at least there has been some professional risk evaluation performed, and in many cases this is better than what the alternative would have been: nothing.

Attorneys generally agree that for the time being, environmental due diligence measures other than a Phase I ESA do not provide a basis for legal defense against future claims.  

If you are doing a non-SBA/USDA deal and are unsure about what level of due diligence is appropriate, it's not a bad idea to ask an attorney.  

If you think you, or the borrower, can't afford an attorney to protect your interests in a real estate deal, then perhaps you haven't seen the costs of not using one when you should have!  

Hot tip: It sounds almost too good to be true, but it really is true: "legal service plans" which offer unlimited access to top-rated attorneys are available in 49 states for families and small businesses, starting at $20/month.