With the latest SOP revisions taking effect on October 1st, 2010 there are certain elements in regards to Environmental Policies and Procedures found in SOP 5010 5 (C) (pages 199 – 206 & 310 – 317) that lenders should be aware of.
An important fact for lenders to understand is that the Reliance Letter has had a revision and as of October 1, 2010 the Reliance Letter from SOP 5010 5 (B) will no longer be accepted. It is critical for lenders to make sure their environmental firm know of the new Reliance Letter and will sign it. We strongly suggest that lenders make sure that their Environmental Professional understands this prior to engaging them to do the work, and understand that the Reliance Letter cannot be modified in any way.
Overall, the Environmental Requirement changes in this latest SOP were minimal and below we provide the actual revisions to the Environmental Policies for your review.
- When you are making a loan for less than $150,000.00 and the Environmental Questionnaire comes back showing further investigation is required, you may now have a Records Search with Risk Assessment (RSRA) performed instead of having to go to a Transaction Screen Report. SBA believed that this was more with the natural progression of reporting and therefore made this change.
- When reviewing the NAICS Codes of Environmentally Sensitive Industries the code 8123 LAUNDRY & DRY CLEANING SERVICES it now will state if dry cleaning operations have ever existed on-site. Prior to the revision it stated if dry cleaning operations on site.
- In Section f) Mitigating Factors that SBA will rely upon to disburse before completion of remediation or monitoring, for section f) titled Escrow Account the new SOP clarifies two issues. The first being that the money put into the escrow account can’t come from funds from the SBA loan itself. The second clarification answers the question if the money in the escrow account can be used for the actual remediation itself or if it needs to stay in the escrow account until the remediation is completed. The answer is that yes, it can and should be used for the remediation costs.
- In Section g) Groundwater Contamination Originating from Another Site, the revision to the SOP eliminates the sentence, “and lender can demonstrate that the contamination has not caused significant damage to the collateral value and marketability of the Property”. They made this change understanding the lender really couldn’t demonstrate or comply with this requirement.
- The Reliance Letter in appendix 3 has been modified by adding the words “as it impacts the property” at the end of the last sentence in regards to a Phase II Environmental Site Assessment.
- Special Use Facilities (Section H), when a Phase II is required for a dry cleaners in operation for more than five years the Phase II 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.
- Appendix 5: Requirements Pertaining to Gas Station Loans, Phase I’s no longer need to be conducted by an 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. It can now be conducted by an Environmental Professional meeting the requirements as outlined in Appendix 2: Definitions.
- Appendix 5: Requirements Pertaining to Gas Station Loans, Phase II’s must be conducted by an 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.
Partner Engineering and Science has a SBA Division dedicated to assisting lenders in understanding SBA’s Environmental Requirements and providing Environmental Reports nationwide for 7a and 504 loans. We are truly the SBA Experts that lenders, CDC’s, and attorneys nationwide have come to depend on!
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The changes found in SBA’s SOP 5010 5 (C) can be viewed by going to: http://www.sba.gov/idc/groups/public/documents/sba_homepage/serv_sops_50105c.pdf