Small Business Loan Qualifications

Requires due dilligence for SBA credits

Small Business Administration (SBA) has recently reviewed its SOP 50-10 (5) procedures for loan programmes from creditors and developers. Much of the change is more radical than before and probably involves a very thorough handling of credit. This new SOP obliges creditors to match the North American Industry Classification System (NAICS) classification system applicable to existing and past tenants of the real estate with a set of 58 NAICS classification systems that the SBA has defined as environmental sectors.

When there is compliance with an NAICS green site classification, the SOP will require at least a Stage I Environment Site Assesment (ESA). When there is no agreement and the loan is over $150,000, the SOP will require an environment survey, record finding, and hazard evaluation. The results may lead to demands on a Stage I ESA. Therefore, the results of this study will be used as a basis for a further Stage I project.

If there is no agreement and the loan is less than $150,000, the SOP will still ask for at least one green card that may result in a deal audit or a more stringent Stage 1SA. Stage I GSAs must meet the ASTM 1527-05 standard. For credits at petrol station older than one year, a Stage I ESA is required.

Petrol filling station that are five or more years old need a Stage II European Space Agency (ESA) which usually includes ground and ground water investigations. It is the responsibility of the environment advisor carrying out the evaluation of the European Investment Bank (ESA) or transactions screens to explain in a trust written that the creditor and the SBA can count on this SBA.

SOP also requires environment advisors to have at least $1 million in assurance for mistakes and overages. SBA will not grant a loan for a contamined or remediated real estate unless the risks associated with the contaminations are properly considered. Eight attenuating circumstance are identified under which it would consider authorising a loan despite on-going rehabilitation or pollution.

This includes, among other things, procuring a "no further action" certificate, using state funds or reimbursing remediation expenses, ensuring compensation from a third person or preventing 150 per cent of the estimate remediation expenses. A compensation arrangement must comply with the authorized terms and content of the SOP and be implemented by a skilled indemnifier, such as the vendor or another third person.

SBA will also carry out an independent review of the indemnifier's qualifications. SBA will not always need a comprehensive environment assessment for every real estate acquisition, but the scope of the assessment will vary depending on the level of exposure. Creditors and buyers should be acquainted with the SBA's new environment protection regulations.