Complying with the Small Business Administration’s SOP 50 10 5(C) Policy

On October 1, 2010, the U.S. Small Business Administration adopted SOP 50 10 5(C), its updated policy for 7(a) and certified development company (CDC) loan programs and there is still a lot of confusion about the level of environmental investigation the agency requires for its various loans. Here is what you need to know about the agency’s newest environmental due diligence tool, the Records Search with Risk Assessment (RSRA).

A RSRA is required when the property’s current or past use is not a NAICS (North American Industry Classification System) code match to an environmentally sensitive industry:

  • And the loan amount is greater than $150,000, or
  • The loan amount is less than $150,000, and the environmental questions reveal the need for further investigation.

The RSRA must contain the following:

  • A search of the government databases identified in 40 CFR 312.265 for an AAI-compliant Phase I environmental site assessment.
  • A Search of historical use records (aerial photography, city directories, fire insurance maps, etc.) pertaining to the property and adjoining properties.
  • A Risk assessment by a qualified environmental professional who reviews the results of the records search to determine if the property is a low, elevated or high risk.

Below is a helpful flow chart developed by EDR to help you decide what action is needed on a particular property. This chart is the minimum steps of environmental investigations of commercial properties required by the U.S. Small Business Administration’s updated SOP for lender and certified development company (CDC) loan programs. More stringent due diligence may be warranted based on the lender or CDC’s policies and prudent lending practices. Note that the SAB also requires that certain “special use facilities” (e.g., daycares or nursery schools constructed before 1980) undergo lead risk assessments for lead-based paint and testing for lead in drinking water.

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