SBA Crash Course: The SBA SOP and Why You Should Care

The Small Business Administration’s SOP for 7a & 504 loans (currently SOP 50 10 5 (E)) has become a very popular policy for environmental due diligence that many banks have adopted as their own bank policy.  Instead of trying to reinvent the wheel, or (for SBA lenders) having two policy’s in place – one for the bank and one for 7a & 504 loans – they have simply instituted the SBA Environmental Policy for all loans.  Bank regulators have stated that they are looking to see that lending institutions have a policy in place and that all loans adhere to that policy, and the SBA Environmental Policy is a great guideline that may be useful to any lender looking to create a formal environmental policy.

In essence, the SBA 50 10 5 (E) SOP mandates a tiered approach to environmental due diligence, based on loan size and property type/risk.  Lower risk properties (such as office buildings) and smaller loans (under $150K) don’t have to do a full Phase I Environmental Site Assessment, but instead start with a limited environmental report as a cost effective way to screen properties for environmental risk.  If an issue is identified, or the property use is high risk (such as an auto servicing facility), then the level of due diligence increases to a Phase 1 ESA or more in some cases.