The Small Business Administration (SBA) has very specific environmental due diligence procedures which can be confusing. To sort it all out for you, A3 Environmental Consulting built this infographic SBA Environmental flow chart. Depending on the type of loan you are applying for and the use of the property you are buying, you can determine which environmental due diligence product will work for you. The most important reason people use the SBA Environmental Flow Chart is to see if they qualify to save themselves a few dollars when performing Environmental Due Diligence for their SBA backed loans.
Transaction costs can be substantial and the SBA has kindly created a less expensive route than a full Phase I ESA, it’s called the Record Search With Risk Assessment, or RSRA for short. A RSRA is about 40% the cost of a full Phase I ESA. To put a finer point on it, a RSRA is $850 and a Phase I ESA is typically $2200. In order to know if you qualify to use the RSRA, you’ll need to figure out if the property type you are buying falls into what are called “Environmentally Sensitive Industries”. We do this by seeing if it’s on the list of NAICS codes.
NAICS Code Match
NAICS means North American Industry Classification System and is used by governments to segment business types to create business climate statistics. You will need to know your NAICS Code which you can research here. You should think for a moment before you start your search about what type of business is currently in the property you want to purchase. Does it have anything to do with metals, dry cleaning, or automotive? If so, there’s a high likelihood that you will not be able to use a RSRA. Once you know your NAICS code, try to find it on the list below:
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- 211 OIL & GAS EXTRACTION
- 212 MINING (EXCEPT OIL & GAS)
- 213 SUPPORT ACTIVITIES FOR MINING
- 237 HEAVY & CIVIL ENGINEERING CONSTRUCTION
- 311 FOOD MANUFACTURING (if underground fuel tanks present)
- 312 BEVERAGE & TOBACCO PRODUCT MANUFACTURING (except breweries, 31212)
- 313 TEXTILE MILLS (not required if sewing, weaving, or hemming only)
- 314 TEXTILE PRODUCT MILLS (not required if sewing, weaving, or hemming only)
- 316 LEATHER & ALLIED PRODUCT MANUFACTURING (not required if assembly only)
- 321 WOOD PRODUCT MANUFACTURING (if finishing occurs on site)
- 322 PAPER MANUFACTURING
- 323 PRINTING & RELATED SUPPORT ACTIVITIES
- 324 PETROLEUM & COAL PRODUCTS MANUFACTURING
- 325 CHEMICAL MANUFACTURING
- 326 PLASTICS & RUBBER PRODUCTS MANUFACTURING (not required if assembly only)
- 327 NONMETALLIC MINERAL PRODUCTS MANUFACTURING
- 331 PRIMARY METAL MANUFACTURING
- 332 FABRICATED METAL PRODUCT MANUFACTURING (not required if assembly only)
- 333 MACHINERY MANUFACTURING (not required if assembly only)
- 334 COMPUTER & ELECTRONIC PRODUCT MANUFACTURING (not required if assembly only)
- 335 ELECTRICAL EQUIPMENT, APPLIANCE & COMPONENT MANUFACTURING (not required if assembly only)
- 336 TRANSPORTATION EQUIPMENT MANUFACTURING
- 337 FURNITURE & RELATED MANUFACTURING (if finishing occurs on site)
- 339 MISCELLANEOUS MANUFACTURING (only required if hazardous materials are involved)
- 42311 AUTOMOBILE & OTHER MOTOR VEHICLE MERCHANT WHOLESALERS (if service bays present)
- 42314 MOTOR VEHICLE PARTS (USED) MERCHANT WHOLESALERS
- 4235 METAL & MINERAL MERCHANT WHOLESALER
- 42393 RECYCLABLE MATERIAL MERCHANT WHOLESALER
- 4246 CHEMICAL & ALLIED PRODUCTS MERCHANT WHOLESALERS
- 4247 PETROLEUM & PETROLEUM PRODUCTS MERCHANT WHOLESALERS
- 441 MOTOR VEHICLE AND PARTS DEALERS (if service bays present)
- 447 GASOLINE STATIONS
- 45431 FUEL DEALERS (not required for propane or firewood dealers)
- 481 AIR TRANSPORTATION
- 482 RAIL TRANSPORTATION
- 484 TRUCKING (if service bays, truck washing, or fuel tanks present)
- 486 PIPELINE TRANSPORTATION
- 488 Support Activities for Transportation (if fuel tanks are present or if repairs or maintenance is performed on site)
- 53212 TRUCK, UTILITY TRAILER, AND RV (RECREATIONAL VEHICLE) RENTAL & LEASING (if repairs, maintenance or vehicle washing are performed onsite)
- 53241 CONSTRUCTION, TRANSPORTATION, MINING & FORESTRY MACHINERY & EQUIPMENT RENTAL & LEASING (if repairs, maintenance or vehicle washing are performed onsite)
- 53249 OTHER COMMERCIAL & INDUSTRIAL MACHINERY & EQUIPMENT RENTAL & LEASING (if repairs, maintenance or vehicle washing are performed onsite)
- 54138 TESTING LABORATORIES
- 56171 EXTERMINATING & PEST CONTROL SERVICES
- 562 WASTE MANAGEMENT & REMEDIATION SERVICES
- 6221 GENERAL MEDICAL & SURGICAL HOSPITALS (if fuel tanks are present)
- 713990 OTHER RECREATIONAL INDUSTRIES (indoor and outdoor shooting ranges only)
- 71391 GOLF COURSES & COUNTRY CLUBS
- 71392 SKIING FACILITIES
- 71393 MARINAS
- 7212 RV (RECREATIONAL VEHICLES) PARKS & RECREATIONAL CAMPS (if fuel tanks are present or if vehicle repairs or maintenance is performed onsite)
- 8111 AUTOMOTIVE REPAIR & MAINTENANCE (except for “car wash only” facilities, for which a Transaction Screen is an acceptable starting point)
- 8112 ELECTRONIC & PRECISION EQUIPMENT REPAIR & MAINTENANCE (not required if assembly only)
- 8113 COMMERCIAL & INDUSTRIAL MACHINERY & EQUIPMENT REPAIR & MAINTENANCE
- 8122 DEATH CARE SERVICES (unless no embalming or cremation at the Property)
- 8123 LAUNDRY & DRY CLEANING SERVICES (if dry cleaning operations have ever existed on site)
- 812921 PHOTOFINISHING LABORATORIES (except one hour)
Dollar Amount Borrowed
The magic number of dollars borrowed from the SBA is $250,000. Is your loan amount over or under? If it’s over, but your property use type is not on the list of restricted NAICS codes, you can use a Record Search with Risk Assessment (RSRA) for your environmental due diligence needs. If it’s under, you can use an environmental questionnaire and we would recommend an environmental screen. The environmental screen will audit the federal, state, county and municipal databases for any contamination that crossed the path of a regulatory body.
SBA Environmental Flow Chart (RSRA)
SBA Environmental Flow Chart (PDF) Download 2021
A3 Environmental Consultants developed this SBA Environmental Flow Chart as a PDF so you could download it and post it at your lending operation. Your loan production people are going to need to internalize this infographic to set the expectations of your lending clients.
If you’re looking into an RSRA for yourself, its important to keep in mind there’s no shortcuts to this process. The SBA are sticklers for the proper paperwork and when in doubt they will go the most stringent route possible. Another thing to note is if you are purchasing a former dry cleaner with an SBA loan, you are going to do a Phase II ESA on the property.
SBA Environmental Questionnaire
I covered this topic extensively in this post. The bottom line is you’ll need to settle on a standard Environmental Questionnaire as part of your procedures.
If you need a SBA Environmental RSRA, research or testing done on your property or one you are interested in purchasing, give A3 Environmental Consultants a call. We’ll get your project done with the utmost in confidentiality, we’ll meet or exceed Small Business Administration (SBA) Standard Operating Procedure 50 10 6 on any sort of commercial or industrial property. Our Assessments meet the requirements of all commercial lenders and government agencies such as the SBA, Housing and Urban Development (HUD) and the United States Department of Agriculture (USDA). A3 Environmental Consultants can be reached at (888) 405-1742 or by email at Info@A3E.com.
