Which statement about environmental assessments is TRUE?

Environmental assessments play a crucial role in the lending process, particularly when commercial real estate is involved as collateral for a loan. The requirement to conduct these assessments stems from the need to identify any potential environmental liabilities associated with the property, such as contamination or other environmental risks. This is vital for both the lender and the borrower, as it helps protect against future legal and financial repercussions that could arise from environmental issues.

When commercial real estate is used as loan collateral, lenders generally mandate an environmental assessment to ensure the property is free from any hazardous conditions that could subsequently affect its value or usability. This requirement is not just a procedural step; it is often dictated by both regulatory frameworks and internal risk management policies of financial institutions. By conducting these assessments, lenders can make informed decisions and mitigate risks associated with their lending practices.

The other statements do not accurately reflect the importance and mandatory nature of environmental assessments in the context of lending against commercial properties. Assessments are not optional; they focus more on environmental conditions than financial projections; and they are required regardless of whether the borrowing entity is a new or established company.