Effective on October 1, 2011, the Small Business Administration has revised its SOP relating to environmental review and environmental investigations. Any lenders participating in the 7(a) or CDC loan programs must follow the new requirements under SOP 50 10 5(D). As of October 1, 2011, all documentation submitted in support of SBA loans needs to be updated to reflect SOP 50 10 5 (D), not its predecessor, SOP 50 10 5(C).
Some of the important modifications to the SBA’s environmental due diligence requirements under SOP 50 10 5(D) include:

  • The only change to the NAICS code list of environmentally sensitive industrial classifications is for 8111 Automobile Repair and Maintenance. All loans under this NAICS code must start with an AAI-complaint Phase I environmental site assessment with the exception of “car wash only” facilities, which can start with a Transaction Screen.
  • If the Property is a unit in a multi-unit building (defined as any non-industrial, multi-unit building that is comprised of four or more individual units), the investigation must proceed as follows: -For loans $150,000 and below, the Environmental Investigation may begin with an Environmental Questionnaire. For loans more than $150,000, the Environmental Investigation must, at a minimum, begin with an Environmental Questionnaire and a Records Search with Risk Assessment.
  • Within the unique requirements for gas station loans, the SBA expanded the definition of gas station loans to also include “commercial fueling facilities;” and replaced the previous requirement for UST testing with a requirement that the environmental professional ensure compliance with all state requirements pertaining to tank and equipment testing.
  • The provisions for conducting a lead risk assessment for lead based paint and testing for lead in drinking water for certain “special use facilities” (e.g., day cares, nursery schools) were expanded to include “residential care facilities occupied by children.”
  • To the definition of Environmental Questionnaire, the SBA allows for the EP to assist with the responses to the questionnaire and the use of the ASTM’s questionnaire for Transaction Screens ( ASTM E1528-06) as a protocol for the Environmental Questionnaire.
  • To the definition of “Phase I ESA,” the SBA added language from the EPA’s AAI rule that allows a person who is not a qualified EP to assist in an AAI-compliant Phase I, provided the person works under the supervision or responsible charge of a qualified EP and the EP reviews and signs the report.
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