It’s easy to understand why lenders need to protect themselves when loaning money to commercial customers. In an economic climate where interest rates are low, competition is high, and governmental oversight is the norm, the need for a safeguard is more prevalent than ever.
Environmental issues can create a major economic hardship for the borrower. These environmental problems often exceed the typical insurable exposures such as fires, theft and vandalism, or title issues. Borrowers, as well as lenders, need to have a solid understanding of the environmental risks associated with a commercial property. Otherwise a default becomes more probable.
A lender had little choice once a borrower had defaulted on a property with existing environmental issues - sell the property at a reduced value due to the environmental conditions present; or potentially incur liability, spending money remediating the issues in an effort to sell the property to recoup a percentage of the loan balance owed.
Great American provides an alternative. The Great American Lender Policy provides environmental insurance geared towards the lender’s interests. In addition to making the lender whole in the event of a loan default, the policy provides the lender protection from a wide range of environmental exposures including bodily injury, property damage and clean-up costs arising from pollution conditions that occur on the covered location.
The Lender Policy not only helps protect commercial lenders but also facilitates their environmental departments in securing loans, allowing bank personnel to be more efficient and profitable. Instead of having a lender simply deny a loan on a property due to environmental issues, the underwriting process and the policy have the ability to add efficiencies to the credit review process, provide faster turnaround, and simplify the sale of the loan to other lenders.
Interested in learning more about lender product? Check out Secured Creditor Protections Supported by Lender Environmental Policies and Wrong place, wrong time! articles in this issue!