The SBA Changes Environmental Rules Effective August 1st 2008

The following table is LCS’ attempt to summarize just exactly what these changes mean to you and our solution to assuring your compliance to the new regulations.

The Challenges...

The Questionnaire

The SBA has made it very clear that Lenders must visit the site under the new rules and fill in a questionnaire. The SBA issued a guidance document as to the content of the questionnaire but stopped short of offering a specific questionnaire or recommending the use of the ASTM Questionnaire.

The Solution

LCS has developed an SBA compliant questionnaire for your use. LCS has also developed a program wherein the entire questionnaire process is managed and handled by LCS and its staff including sending, tracking, collecting and analyzing the questionnaire for the bank. You will have a choice of the services you can take advantage of from LCS including the EAQuick Opinion Report or the EAQuick Loan Check Report.

Site Visits

All transactions (except NAICS Code Match sites) will require that the Lender visit the site. It is unclear if the bank can delegate the site inspections over $150M to a consultant. At present, the indication is that the Lender must still see the site even if a consultant is used. Clearly it will be far less expensive for environmental due diligence if the consultant only provides the database and the opinion portion of the new requirements and not the site inspection.

The Solution

LCS believes however that the questionnaire (whether completed by the Lender or through LCS) should be reviewed by an EP to assure that any recognized environmental condition can be properly identified and addressed in conjunction with the database report and environmental opinion service.

• Effective August 1, 2008
• Deals Under $150M and No Match on the NAICS Code List:
• Lender must make one site visit and attempt to interview current owner/ operator
• Lender must get a Questionnaire completed and signed during the visit
• Questionnaire to be developed by Lender or by the Lender’s consultant
• If there is an “issue” discovered during the review of the Questionnaire, a minimum of an ASTM 1528-06 Transaction Screen report must be completed by an Environmental Professional
• If there are no issues discovered, the file can be submitted to the SBA
• Deals $150M and Up and No Match on the NAICS Code List:
• Lender must make one site visit and attempt to interview owner/operator
• Lender must get the Questionnaire completed and signed during the visit
• Lender (or an independent consultant) must provide historical research on the subject site and adjacent properties
• An environmental data report must be ordered that evaluates the site and risk (Low, High/Elevated Risk Opinion) or the environmental data must be reviewed and a risk assigned
• If the Opinion Report, historical data and the Questionnaire do not identify environmental issues, the file can be submitted to the SBA
• If an environmental issue is identified, an AAI Phase I is needed to be completed by an EP
• Deals with a NAICS Code List Match:
• If the NAICS code matches the list provided by the SBA, an AAI Phase I is required regardless of loan amount
• If the site is a gas station, an AAI Phase I must be engaged and, dependent on the age of the station, additional investigations will be necessary.

LCS has developed the EAQuick Opinion Report and the EAQuick Loan Check Report to meet the SBA rule changes.

EAQuick Opinion Report - You Provide the Questionnaire Service

LCS realized that there were several Opinion Reports available in the marketplace but none offered the three most important protections a bank would need to get comfortable with such reports, that being:

• Review and analysis by an Environmental Professional
• High or Low Risk Ranking
• Professional Environmental Liability Insurance

The EAQuick Opinion Report contains data and information not offered by others in the industry and at turnaround times designed to meet a Lenders specific needs.

EAQuick Loan Check Report - LCS Provides Questionnaire Service

LCS’s EAQuick Loan Check Report is a much more detailed environmental risk assessment report that adds the SBA Questionnaire to the basic report as well as Recommendations and not just a High or Low Risk Ranking. The report will include the following:

• Phase I database review
• Municipal research
• SBA Compliant questionnaire
• Historical info (Sanborn Maps, etc.)

Currently LCS uses this report for Lenders on small balance commercial mortgages ($150M to $500M) across the country and found that it is perfectly adaptable for use under the new SBA requirements.

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