{"id":2367,"date":"2022-07-12T18:45:28","date_gmt":"2022-07-12T18:45:28","guid":{"rendered":"https:\/\/listselfstorage.com\/us\/industry-insights\/?p=2367"},"modified":"2022-10-11T14:57:44","modified_gmt":"2022-10-11T14:57:44","slug":"environmental-report-requirements-for-sba-loans","status":"publish","type":"post","link":"https:\/\/listselfstorage.com\/us\/industry-insights\/environmental-report-requirements-for-sba-loans\/","title":{"rendered":"Environmental Report Requirements for SBA Loans"},"content":{"rendered":"<p><!-- VideographyWP Plugin Message: Automatic video embedding prevented by plugin options. --><br \/>\n<span style=\"color: #333333;\">In order to qualify for the SBA\u2019s guaranty for 7a and 504 loans, the SBA requires certain levels of environmental due diligence be performed to provide assurance that the property site value is not hampered by previous contamination or environmental degradation.<\/span><\/p>\n<p><span style=\"color: #333333;\">Reasons for diminished property site value may include:<\/span><\/p>\n<ul>\n<li><span style=\"color: #333333;\">The costs of remediation could impair the borrower\u2019s ability to repay the loan and\/or continue to operate the business<\/span><\/li>\n<li><span style=\"color: #333333;\">The value and marketability of the property could be diminished<\/span><\/li>\n<li><span style=\"color: #333333;\">Lender or SBA could be liable for environmental clean-up costs and third-party damage claims arising from contamination<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #333333;\">With certain property types being &#8211; or having been &#8211; used by Environmentally Sensitive Industries, the SBA requires the engagement of federal protection against CERCLA (Comprehensive Environmental Response, Compensation and Liability Act) liability. They also require the engagement of an environmental firm\u2019s Errors and Omissions insurance policy to help protect the buyer, the lender and the SBA.<\/span><\/p>\n<p><span style=\"color: #333333;\">The SBA requires an environmental investigation of all commercial property upon which a security interest such as a mortgage, deed of trust or leasehold deed of trust is offered as security for a loan or debenture. The type and depth of an environmental investigation varies with the risks of contamination. The higher the risk for contamination the more in-depth study will be required (see flowchart on back page). Phase I ESA is a non-intrusive study of the environmental condition of a property site. The goal of the study is to identify any Recognized Environmental Conditions (RECs) in connection with the property \u2013 if any exist.<\/span><\/p>\n<p><span style=\"color: #333333;\"><strong>Flow Chart of Required Reports: <\/strong><\/span><\/p>\n<p><span style=\"color: #333333;\">Unless a historical use or prior NAICS code triggers the need for a Phase 1 report, the most basic report a borrower may need is a Records Search with Risk Assessment (RSRA).<\/span><\/p>\n<p><span style=\"color: #333333;\">An RSRA includes:<\/span><\/p>\n<ul>\n<li><span style=\"color: #333333;\">A search of government databases identified in 40 CFR \u00a7 312.265 for an AAI compliant Phase I, as well as a search of historical use records (i.e., aerial photography, city directories, reverse directories and\/or fire insurance maps) pertaining to the Property and Adjoining Properties; and<\/span><\/li>\n<li><span style=\"color: #333333;\">A risk assessment by an environmental professional based on the results of the records search as to whether the property is \u201clow risk\u201d, \u201celevated risk\u201d or \u201chigh risk\u201d for contamination. The choice of historical records to be reviewed on any particular site is at the discretion of the environmental professional. The report must identify by name the environmental professional that performed the risk assessment.<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #333333;\">If the RSRA Report comes back as \u201celevate or high risk\u201d then a Phase 1 Report must be ordered.<\/span><\/p>\n<p><span style=\"color: #333333;\">The Phase I Report is a non-intrusive study of the environmental condition of a property site. The goal of the study is to identify any Recognized Environmental Conditions (RECs) in connection with the property \u2013 if any exist. The American Society for Testing and Materials (ASTM) has created a standardized scope of work describing the preparation of a Phase I ESA (ASTM 1527 13).<\/span><\/p>\n<p><span style=\"color: #333333;\"><strong>The requirements may include: <\/strong><\/span><\/p>\n<p><span style=\"color: #333333;\">A Regulatory Agency Records Review<\/span><\/p>\n<ul>\n<li><span style=\"color: #333333;\">Fire department records<\/span><\/li>\n<li><span style=\"color: #333333;\">Dept. of Toxic Substances Control<\/span><\/li>\n<li><span style=\"color: #333333;\">Regional Water Quality Control Board<\/span><\/li>\n<li><span style=\"color: #333333;\">Environmental Health Services Dept.<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #333333;\">Site History Survey<\/span><\/p>\n<ul>\n<li><span style=\"color: #333333;\">Historical aerial photographs<\/span><\/li>\n<li><span style=\"color: #333333;\">Building and planning department records<\/span><\/li>\n<li><span style=\"color: #333333;\">Sanborn Maps<\/span><\/li>\n<\/ul>\n<p><span style=\"color: #333333;\">Nick Collins<\/span><br \/>\n<span style=\"color: #333333;\">Commercial Lender &#8211; Vice President<\/span><br \/>\n<span style=\"color: #333333;\">Bank Five Nine<\/span><br \/>\n<span style=\"color: #333333;\">p: (262) 560-2016<\/span><br \/>\n<span style=\"color: #333333;\">c: (262) 468-6169<\/span><br \/>\n<span style=\"color: #333333;\">f: (262) 804-9926<\/span><br \/>\n<span style=\"color: #333333;\"><a style=\"color: #333333;\" href=\"mailto:nick.collins@bankfivenine.com\">nick.collins@bankfivenine.com<\/a><\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In order to qualify for the SBA\u2019s guaranty for 7a and 504 loans, the SBA requires certain levels of environmental due diligence be performed to provide assurance that the property site value is not hampered by previous contamination or environmental degradation. Reasons for diminished property site value may include: The costs of remediation could impair the borrower\u2019s ability to repay the loan and\/or continue to operate the business The value and marketability of the property could be diminished Lender or SBA could be liable for environmental clean-up costs and third-party&hellip;<\/p>\n","protected":false},"author":7,"featured_media":536,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":[],"categories":[4],"tags":[],"gutentor_comment":0,"_links":{"self":[{"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/posts\/2367"}],"collection":[{"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/users\/7"}],"replies":[{"embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/comments?post=2367"}],"version-history":[{"count":2,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/posts\/2367\/revisions"}],"predecessor-version":[{"id":2384,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/posts\/2367\/revisions\/2384"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/media\/536"}],"wp:attachment":[{"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/media?parent=2367"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/categories?post=2367"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/listselfstorage.com\/us\/industry-insights\/wp-json\/wp\/v2\/tags?post=2367"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}