SBA Crash Course – Topic 3: The Records Search with Risk Assessment

In the tiered approach the SBA SOP follows, the first possible environmental report to be completed is the Records Search with Risk Assessment (RSRA). Not all loans require or warrant a full Phase I Environmental Site Assessment, unless stipulated by internal bank policy. Please keep in mind the SBA SOP 50 10 6 is the minimum requirements that are set forth by SBA.

Per the SBA SOP 50 10 6, the RSRA can be used when the loan amount is over $250,000 and the property type is not listed on the SBA NAICS code list of environmentally sensitive industries. Examples of industries include, but are not limited to mining, various types of manufacturing, printing operations, various transportation operations, automotive repair, etc.

A RSRA is defined as a risk assessment by an Environmental Professional based on the results of the records search as to whether a property is “low risk” or “high risk” for contamination. The report must identify by name the Environmental Professional that performed the assessment and include a search of the government databases identified in 40 CFR § 312.265 for an AAI compliant Phase I. It must also include a search of historical use records dating back to 1940 or first developed use pertaining to the subject property. Appropriate records can include aerial photography, city directories, reverse directories, and/or fire insurance maps. Topographic maps are also appropriate; however, should not be used as a sole-source for determination of risk.

A RSRA will generally conform to the Phase I ESA ASTM Standard (E1527-13) rather than the “next step-up” report, the Transaction Screen Assessment (TSA) which has its own ASTM method to follow (E1527-14). When a RSRA is ordered, it is the responsibility of the lender to perform a good faith site visit with the property owner/occupant (signature required) to assess the property and to complete an Environmental Questionnaire (EQ). If the property owner refuses to sign the EQ, at a minimum the lender must complete a TSA.

If you choose to screen a property with a RSRA, you should ask that your consultant notify you the instant a potential “High Risk” environmental issue is identified, and prior to the report’s completion. If there is a potential environmental concern it would be more prudent to do a full Phase I Environmental Site Assessment, as it is required by SBA lenders if any issue is identified in the RSRA. A good consultant will not waste your time or dollars, but instead will offer to upgrade to a Phase I ESA since the work for the RSRA will ultimately be rolled into the Phase I ESA.

The SBA Crash Course Series:

Topic 1: The SBA SOP and Why You Should Care
Topic 2: The Environmental Questionnaire
Topic 3: The Records Search with Risk Assessment
Topic 4: The Transaction Screen Assessment
Topic 5: SBA Screen Outs and Appeals
Topic 6: Reliance Letters
Topic 7: The Phase I ESA and Beyond