Wednesday, March 12, 2014 12:00 AM

2014 SBA Lending Update

By: Joe Berlin, Judd Olson, Jeff Kenneweg
Tags: None

SBA Lending Update – March 2014

It is important to stress that when conducting any work for governmental lending programs (e.g. Small Business Administration (SBA)) dotting every “I” and crossing every “T” is critical to closing the loan. The latest SBA environmental requirements are outlined in its Standard Operation Procedure (SOP 50-10-5(F), effective January 1, 2014). Although the SOP references the use of the 2005 vintage Phase I ESA standard (E1527-05), the SOP indicates that the most current version (i.e. E1527-13) should be used.

Varying Levels of Work

Depending on the historical or current property use and loan size, the SOP also provides for the use of “limited” environmental due diligence, including Environmental Questionnaire (EQ), Records Search with Risk Assessment (RS/RA) and Transaction Screen. A detailed review of the SOP and subject property specifics is necessary to identify the minimum level of Environmental Due Diligence (EDD) required under the SOP.  However, conducting anything less than a Phase I Environmental Site Assessment (ESA) (ASTM E1527) will not meet the “all appropriate inquiry” (AAI) requirements.

Michigan – A Special Case

In some recent SBA projects in Michigan the use of the combined Phase I ESA, Phase II ESA, Baseline Environmental Assessment (BEA), Due Care Plan (DCP) (as a DDCC), agency DDCC “approval” were used to meet the SBA mitigating factor (c) “No Further Action”.  Since response activities were included in the DCP an environmental escrow (SBA mitigating factor (f) “Escrow Account”) was also necessary for loan disbursement. In these recent cases (early 2014) the agency issued the DDCC approval “with conditions”.  The “conditions” were the DCP-specified response activities (e.g. soil removal, pavement placement and restoration).  A flowchart of this process is provided below.

Joseph Berlin is a professional engineer in multiple states, Ohio CP, NAFE member and testifies throughout the country on various environmental issues. He also is the owner of BLDI, a full-service environmental engineering firm headquartered in Grand Rapids. Judd Olson, EP and Jeff Kenneweg, EP of BLDI assisted in the development of this article. ( 



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