SBA Environmental Due Diligence
Partner Engineering and Science has a team of professionals dedicated to work on environmental investigations for 7a & 504 SBA loans. We have developed key relationships within the U.S. SBA that enable us to stay current of all requirements laid out by the SBA for environmental investigations. We work with key individuals and committees in regards to SOP changes, appeals, and policy notices.
Whether you need a Records Search with Risk Assessment (RSRA), a Transaction Screen, a Phase I or a Phase II, the SBA team at Partner Engineering and Science are your nationwide experts for any environmental investigation on 7a or 504 loans. We not only meet the liability insurance requirements of the SBA - we exceed them. We include the SBA Reliance Letter on every Transaction Screen Report, Phase I Report, and Phase II Report. We work to insure your environmental report meets every requirement set forth by the SBA, and passes their intense scrutiny with ease. Our goal is to take this one piece of the puzzle and provide our clients (our Partners) with comfort and confidence so they don't have to worry whether or not the environmental will be handled flawlessly each and every time.
While working on environmental investigations for loan originations or foreclosures, we provide the highest quality reports for a fair price - and we do it with a sense of urgency. We pride ourselves in producing exceptional quality reports, exceptional communication throughout the environmental investigation process, and in doing business the way you do business.
Partner SBA Educational Resources
As your partner, we provide many educational handouts to assist loan officers in communicating to their borrowers the need for environmental investigations, help underwriters understand which reports are required depending upon the property type, and help everyone understand SOP 50 10 5 (E). For free copies of any of our lender tools, please contact us and we will send you as many hard copies as you need.
So what report do you need for your 504 or 7a loan? This depends on the current and past businesses that occupied your property. SBA has created a NAICS codes list of "Environmentally Sensitive Industries". The type and depth of an environmental investigation to be performed varies with the risks of contamination. The higher the risk for contamination, the more in-depth the study that will be required. This list can be found at www.partneresi.com under the "Resources" tab. Once there simply click on SBA NAICS Code List. If the property type is not listed (and the loan value is over $150,000) you can begin your environmental investigation with a RSRA (Records Search with Risk Assessment) as shown in the SBA SOP Decision Tree (Flowchart) found on our "Resources" page. If the loan amount is under $150,000 (and the property type is not found on the NAICS list) then the lender can fill out an EQ (Environmental Questionnaire) with the owner/occupant of the property and submit to SBA.
When you order a Records Search with Risk Assessment (RSRA), the lender is required to do a site visit and fill out an EQ (Environmental Questionnaire) with the owner/occupant and submit with the RSRA report to SBA. For a copy of an Environmental Questionnaire, that meets SBA requirements, you can find one on our "Resources" page. ( Please note that the SBA Reliance Letter is not to accompany a RSRA report.)
When a RSRA report comes back with High Risk, SBA requires that the lender must then proceed to a Phase I. Partner Engineering credits the cost of the RSRA towards the cost of a Phase I so that the borrower isn't paying twice (if Partner has performed the RSRA and the Phase I).
For property types that are listed on the NAICS list, SBA dictates that the lender/borrower must begin with a Phase I Environmental Site Assessment (ESA). The Phase I must be AAI compliant (ASTM 1527-05) and must be accompanied by the SBA Reliance Letter.
In Appendix 2 of SOP 50 10 5 (E) you will find a great resource, "Definitions" (available on our "Resources page). Here, you will find various definitions including those regarding an Environmental Professional, various report types, information needed in an Environmental Questionnaire, etc.
Appendix 5 of SOP 50 10 5 (E) "Requirements Pertaining to Gas Station Loans" (available on "Resources" page) shows that all Gas Stations must begin with a Phase I ESA and no longer requires that it be conducted by an independent Environmental Professional who holds a current Professional Engineer's or Professional Geologist's license and has the equivalent of three years of full-time relevant experience. All Phase IIs for Gas Stations and for Dry Cleaners must be conducted by an independent Environmental Professional who holds a current Professional Engineer's or Professional Geologist's license and has the equivalent of three years of full-time relevant experience.
A great source of information for understanding a Phase I can be found on our "Resources" page under the heading, "A Guide to Understanding SBA Environmental Due Diligence for Commercial Properties". This "booklet" can be ordered from Partner at no cost, or you can view it online.
The SBA Environmental Appeals committee Environmentalappeals@sba.gov is a great resource for those that have situations that are "abnormal". They can provide clarification and rulings for those types of properties. Another valuable resource is Stephen Reynolds, Chief Environmental Engineer for SBA in Sacramento. Steve Reynolds can be reached at Stephen.Reynolds@sba.gov and is a valuable resource for CDC's and various other lenders.
The assumption of an SBA loan would fall under SOP 50 50 4A ("Loan Servicing"). There is no requirement in SOP 50 50 4A for an environmental investigation when an existing SBA loan is being assumed. You as a lender may have your own environmental requirements apart from what SBA requires.
Partner is proud to be a member of NAGGL (National Association of Government Guaranteed Lenders); NADCO (National Association of Development Companies); NAPL (National Association of Premier Lenders) and various other SBA lending associations on both national and regional levels. Our team of experts are often on panels at conferences and are regular contributors to various industry magazines.
If you have any questions or situations that you would like to discuss please feel free to give us a call. Consultations are always free and we would love the opportunity to be of service to you.
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For More Information
- Gary Reynolds
- SBA Crash Course: Reliance Letter
- Globe Street, Reynolds
- SBA Crash Course: Phase I Environmental Site Assessments and Beyond
- Globe Street, Reynolds
- NJ SBA Lending Uptick
- Globe Street, Romeo
- SBA Blog Archive