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  • Breakout Session VIII Streamlining the Environmentals

    for SBA Review Studio F

    1:30 pm 2:30 pm

  • Thank you to our Alliance Partners

  • Speakers

    Derek Ezovski, President

    Outsourced Risk Management Solutions

    Stephen Reynolds, Senior Account Executive

    EBI Consulting

    Mary Mansfield, Executive Vice President

    Bay Colony Development Corp.

  • Derek Ezovski

    Former SBA Chief Environmental Engineer


    Stephen Reynolds

    Senior Account Executive

    EBI Consulting


    Outsourced Risk Management Solutions

  • Streamlining the Environmentals for SBA Review

    Session Goal: Cover changes in the environmental industry and provide ways for CDCs to minimize environmental & energy report screen outs while meeting the requirements of SBA SOP 50 10 5(H)

    SBA SOP 50 10 5(H)

    ASTM E 1527-13 Standard

    Contaminated Properties

    Gas Stations

    Special Use Properties

    Concentrated Animal Feeding Operations

    Energy Reports

    Best Practices

    Q & A


  • Lenders Reaction to Environmental Issues

  • SBA Environmental Due Diligence Policy

    2 levels of Environmental Due Diligence for SBA

    1. Phase I for high risk properties

    If property type/use matches the list of NAICS codes for Environmentally Sensitive Conditions

    2. Records Search with Risk Assessment low risk properties

    Includes a search of the government databases (compliant with AAI);

    A search of historical use records, and;

    A risk assessment by an environmental professional determining whether

    the site is High, Elevated or Low risk

    New Gas Station/Dry Cleaner Requirements

  • SBA SOP 50 10 5(H)

    The SBA Reliance Letter has been changed to reflect the

    new Transaction Screen Analysis (TSA) standard:

    ASTM E 1528-14

    Ensure (Lender) is included in the SBA Reliance Letter.

    example: To: [Lender/CDC Name and Address] (Lender)


  • ASTM E 1527-13 Standard Updated the definitions of:

    Recognized Environmental Condition (REC)

    To identify conditions indicative of releases and threatened

    releases of hazardous substances on, at, in, or to the property.

    Historical Recognized Environmental Condition (HREC)

    Limited to include only past releases that have been

    addressed to unrestricted residential use.

    Added definition:

    Controlled Recognized Environmental Condition (CREC) The regulatory agency allows contaminants to remain in place

    under certain restrictions or conditions.


  • ASTM E 1527-13 Standard

    Added clarification to definition of de minimis condition:

    A Phase 1 Environmental Site Assessment will provide

    information on past corrective actions conducted and

    contamination left in place.

    Revised the definition of migrate / migration to include

    vapor migration:

    A Phase 1 Environmental Site Assessment will provide

    information on releases that migrate onto the property via a

    vapor pathway.


  • Contaminated Properties

    If requesting approval of funds with known

    contamination, on-going remediation, monitoring, or

    CRECs on the property, then

    Ensure all information is submitted in accordance

    with SBA SOP 50 10 5(H), Subsection G, Approval

    and Disbursement of Loans When There is

    Contamination or Remediation.

    If the environmental professional concludes that no

    further investigation is warranted, but the Phase I

    Assessment reveals contamination at the property, a

    response to Subsection G is required.


  • Gas Stations

    For contaminated gas stations, at a minimum, the SBA

    Indemnification Agreement must always be obtained and

    signed by the seller.

    A Phase I Environmental Site Assessment should always

    be obtained if the business sells, supplies, or dispenses

    fuel, gasoline, or heating oil, even if the NAICS code for

    the business is not identified on the list of

    environmentally sensitive industries.


  • Special Use Properties

    If a property is a dry cleaning facility and has

    been in operation for more than 5 years, a

    Phase 1 and Phase 2 Environmental Site

    Assessment are required.


    The Phase 2 Environmental Site Assessment must be conducted by a

    Professional Engineer (PE) or a Registered Geologist (RG)

  • Special Use Properties

    If a property is a daycare center, child care

    center, nursery school or a residential care

    facility occupied by children and the date of

    construction is prior to 1980, a lead risk

    assessment (for lead based paint) and testing

    for lead in drinking water are required.


  • Concentrated Animal Feeding Operations


    If a property is a CAFO, include the following with your environmental submission:

    A copy of a CAFO Environmental Questionnaire.

    A copy of the Comprehensive Nutrient Management Plan (CNMP).

    A copy of the CAFO permit.

    A statement from the borrower setting forth how the animal waste and deceased animals will be disposed.

    A copy of the NPDES Permit

    (if treated waste is discharged into a water source)

    A copy of the Land Based Discharge Permit

    (if the waste will be disposed of on land)


    Need a CAFO Environmental Questionnaire?

    Then e-mail me at:

    and Ill send one to you!!

  • Energy Reports

    All energy reports submitted to meet the Energy Public

    Policy Goals are currently being reviewed by SBA

    environmental engineers. Energy goals include: a)

    reduction of existing energy use, b) use of sustainable

    designs, and c) use of renewable energy sources.

    The energy report must include the qualifications of

    the party performing the energy audit, engineering

    report, or other professional evaluation, each of which

    must be performed by an independent third party (an

    entity other than the applicant, the interim lender, the

    third party lender or any of their respective affiliates).


  • Energy Reports Energy Reduction Goal $5.5 million eligibility

    The energy report must demonstrate 10% energy reduction. If the project involves the construction or acquisition of a facility (the new facility), the new facility must replace an existing facility and the new facility must use 10% less energy than the existing facility.

    The new facility must be located in the same local area (e.g. the same city, town, county, zip code, metropolitan statistical area or as otherwise deemed appropriate by SBA).

    If the project involves the retrofit of an applicants existing facility, the retrofit must reduce energy consumption of that facility by at least 10%, regardless of the energy usage of any other facilities that the applicant may operate.


  • Energy Reports

    Sustainable Design Policy Goal - $5.0 million


    Per SBA SOP 50 10 5(H), sustainable building design

    has the meanings given those terms under the

    Leadership in Energy and Environmental Design (LEED)

    standards for green building certifications. An energy

    report by an independent third party is required that

    demonstrates use of sustainable building design.


  • Energy Reports

    Renewable Energy Policy Goal - $5.5 million eligibility

    The energy report must demonstrate that renewable energy

    sources generate more than a de minimus amount (SBA

    interprets more than a de minimus amount to mean at

    least 10%) of the energy used by the applicant at the project


    All improvements or equipment required to generate the

    renewable energy or renewable fuels must be included in the

    project costs.

    Energy reports prepared by the vendor who will supply the

    renewable energy system are not acceptable; a report from

    an independent consultant is needed.


  • Environmental Best Practices

    Have as much control of the process as possible

    Train your lending partners

    Make the submission look good

    Make it easy for the reviewer to review the information

    Make sure things are correct prior to submitting

    Correct any mistakes prior to submitting

    Stay off the radar screen

  • Closing Thoughts

    Dont go it alone if you dont have to

    Help the SBA say yes whenever possible

    Environmental is the tail on the dogdont give it more attention than it needs by waiting until the end #17 of 24 items on the CDC Checklist

    SBA vs. Traditional Lending Hurdles

    Work with Experts

    Use the appeals processwisely.

  • Sample SBA Policy Matrix

    Page 22

    Minimum Due Diligence Requirements

    Real Estate Loan


  • 23

    Below are web links to assist you! Just click on the name

    NAICS Codes

    SBA SOP 50 10 5 (H)

    EPA All Appropriate Inquiries (AAI)