While the SBA requires an Environmental Report on all real estate projects, the type of report varies depending on a number of factors. There have been some recent changes, but Partner Engineering and Science, Inc. has created a helpful flowchart to help you understand what is needed on different sorts of projects.
Worth noting is a renewed emphasis from SBA on documenting the property’s history. Specifically, all reports below must clearly state that historical records identify property uses back to the property’s first developed use, or back to 1940, whichever is earlier. Or to the contrary, the consultant should provide an opinion regarding the significance of this data gap.
Based on the flowchart referenced above a project will require one of the following types of review:
- Risk Search with Risk Assessment (RSRA) paired with an SBA Environmental Questionnaire
- A RSRA is acceptable when the property is vacant land for new construction or an existing property that has not had any prior environmental concerns known
- The RSRA is a reasonably priced due diligence product (~$400-$500) that allows the lender and WBD to evaluate the environmental risk quickly
- Reports come back within ~5 business days
- The SBA Environmental Questionnaire is paired with a RSRA and is completed by the current owner of the property and the lender
- Transactional Screen Assessment (TSA)
- A TSA is a higher level due diligence report. It is less comprehensive than a Phase I Report and more comprehensive than the RSRA Report.
- It is sometimes ordered in place of an RSRA Report
- It MUST include SBA’s Required Reliance Letter
- A TSA Report is required for:
- Car wash facilities (no gas station & no automotive services)
Phase I Report
- A Phase I Report is required for any industries that are considered environmentally sensitive. This includes the current use of the property and any known prior use(s). SBA’s listing of environmentally-sensitive industries can be found within Appendix 6 of the new SBA SOP on pages 367 – 368. The list includes, but is not limited to:
- Gas Stations - also require tank & line testing indicating no deficiencies
- Automotive Service facilities
- Commercial Fueling facilities
- Dry Cleaners
- Other Environmentally Sensitive facilities
- Facilities with prior known contamination
- A Phase I Report MUST include SBA’s Required Reliance Letter
- Report conclusion must include a statement that no further action is needed or recommendation of further investigation, which leads to a Phase II Report
- Phase II Reports
- A Phase II Report is required with the Phase I Report comes back with recommendations for further testing or further investigation.
- A Phase II will typically include soil borings and testing.
- A Phase II Report MUST include SBA’s Required Reliance Letter
- Report conclusion must include a statement that no further action is needed or a remediation plan.
Your WBD Loan officer is well-versed on SBA’s Environmental Requirements, so please make sure to consult with us before ordering any environmental reports to help avoid wasted time or money by getting the right environmental investigation for your project. Remember, we speak SBA, so you don’t have to!