Changes to the USSBA SOP 50 10 5C

The U.S. Small Business Administration has released the new version of the agency's SOP 50 10 5. The new policy, SBA 50 10 5C replaces the SOP 50 10 5(B), and will apply to all applications for 7(a) or CDC loans received by the SBA on or after October 1, 2010. The new revision includes a few modifications to SBA's due diligence requirements.

The changes to the SBA's environmental policies as noted by the Environmental Bankers Association (EBA) include, but are not limited to:

• The NAICS code list of environmentally sensitive industrial classifications (Appendix 4) is to clarify that 8123 "laundry & dry cleaning services" applies "if dry cleaning operations have ever existed on site," not just as current operations;
• For loans of $150,000 or less, if the Environmental Questionnaire determines that further investigation is warranted, the lender must obtain a Records Search with Risk Assessment (RSRA) by a qualified Environmental Professional (this replaces the previous Transaction Screen requirement);
• The requirement of a PE or PG to conduct the Phase I ESA on gas station sites has been lifted, however all Phase II ESA on both gas station and on-site dry cleaning facilities must be conducted by an independent Environmental Professional who holds a current Professional Engineer’s or Professional Geologist’s license as well as having a minimum of three (3) years relevant experience;
• A minor change to the reliance letter in regard to Phase II language was made and the new reliance letter must now accompany all Transaction Screen, Phase I and Phase II ESA reports submitted to the SBA.

As discussed in our last newsletter, many banks have adopted or planned to adopt a similar version of the SBA SOP as their in-house environmental policy. Utilizing the tiered approach to environmental due diligence is quickly becoming a lending industry standard.

The revision to the SOP reflects the SBA's efforts to continually review its environmental policy and make clarifications, as necessary. Anyone with feedback on the SOP is invited to contact SBA via email at environmentalappeals@sba.gov.

A full text version of the SOP 50 10 5C with changes tracked can be found on the SBA.gov website or by clicking here.

As always LCS is here for your environmental due diligence needs on both SBA and conventional loan commercial transactions with on-staff Environmental Professionals, licensed Professional Engineers, and Professional Geologists providing a full suite of services to all types of lenders.

Every day at LCS we ask ourselves… “What’s best for the client?”

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