Breakout Session V Environmental Reviews: Get Them Right Tuesday, November 8 1:45 pm 2:45 pm Golden Gate Ballroom 2-3

Transcription

1 Breakout Session V Environmental Reviews: Get Them Right Tuesday, November 8 1:45 pm 2:45 pm Golden Gate Ballroom 2-3

2 Thank you to our Alliance Partners 2

3 Speakers Eric Adams, District Counsel U.S. Small Business Administration Evan Shaw, Assistant Vice President, Credit Analyst Business Finance Group, Inc. Derek Ezovski, President Outsourced Risk Management Solutions 3

4 Borrowers /Loan Officers Reaction when you tell them they need to do environmental

5 The Reaction when they find out there are Environmental or Appraisal Problems

6 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 Gas Station/Dry Cleaners have specific guidelines

7 Sample SBA Policy Matrix Real Estate Loan Type Minimum Due Diligence Requirements <$150K $150K < $2M Low Risk Loans Questionnaire RSRA/TSA High Risk* Loans NAICS Codes Gas Station Phase I Phase I + Evidence of UST Compliance Phase I Phase I + Evidence of UST Compliance Dry Cleaners Phase I Phase I Dry Cleaner (older than 5 years old) Special Use Facilities (i.e. Daycare) Phase I and Phase II More specific requirements (i.e. Lead Paint Testing, Lead in Drinking Water, etc) Phase I and Phase II More specific requirements (i.e. Lead Paint Testing, Lead in Drinking Water, etc) Page 7

8 Appeal Process The SBA has an appeals process in the event of an adverse environmental determination. Appeals, including exceptions to environmental policy, are reviewed by the Environmental Committee. Lenders who believe that a decision rendered by SBA is inconsistent with the SOP, or who seek an exception to policy, may appeal to the committee by sending a copy of the decision, supporting documentation and an explanation to EnvironmentalAppeals@SBA.gov

9 Appeal Process, Cont. Environmental appeals are reviewed by the SBA Environmental Committee which is comprised of attorneys appointed by the Associate General Counsel for Litigation The SBA Environmental Committee may consult with SBA s Environmental Engineers or another Environmental Professional The Associate General Counsel for Litigation has authority to overrule decisions rendered by the SBA Environmental Committee Examples

10 Appeal Process: CDC Perspective Expectation of the Appeals Committee before the first appeal

11 Appeal Process: CDC Perspective Expectation of the Appeals Committee after the first appeal

12 Appeal Process: CDC Perspective Appeal Submission Tips Provide ALL environmental docs and correspondence with SLPC. Provide a timeline what was submitted and SLPC s screen-out reasons, along with the request and justification. Do not abuse the system!

13 Case Study #1: Potential Wetlands Reports: Ph I & Ph II Issue: Potential wetlands identified on the property. Screen Out: Will the wetlands be disturbed and are there any jurisdictional wetlands on site? Resolution: Letter from EP confirming location of potential wetlands + Affidavit signed by client confirming that a wetlands delineation survey will be ordered prior to development of property.

14 Case Study #2: Successful Appeal Reports: RSRA + EQ Issue: Prior use was vacant land; however, OC (metal fabricator) had been operating in property for 10 months before env. submission to SLPC Screen Out: Ph I required as the OC had already moved into property, thus present use is environmentally sensitive WARNING! Environmentally Sensitive Industry Appeal Resolution: Given that the prior use was undeveloped land, the OC had a short operating history, and RSRA was low-risk, an appeal approval was granted.

15 Case Study #3: The one that got away Reports: Ph I & Ph II Issue: Prior owner (Paper Manufacturer) of property undergoing voluntary clean-up with EPA (Facility Lead Corrective Action Agreement). EPA would not issue a comfort or closure letter confirming that EPA would not take action against new owner (504 client) and/or SBA would not be liable for environmental conditions at site. He-Who-Must-Not-Be-Named Result: Potentially could have utilized other mitigating factors such as additional collateral; however, the client and TPL decided to take the loan conventional.

16 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

17 Closing Thoughts Help the SBA say yes whenever possible Environmental is the tail on the dog don t 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 process wisely.

18 Contact Us Environmental Appeals Committee Derek Ezovski, President, Outsourced Risk Management Solutions (860) Eric Adams, District Counsel, US SBA (415) Evan Shaw, AVP & Credit Analyst, Business Finance Group (703)

19 What s Up Next General Session II Loan Processing from All Angles 3:00 pm 4:15 pm Continental Ballroom 4-5 Regional Caucuses 4:15 pm 5:00 pm Regions I and II Caucuses - Continental Ballroom 1-3 Regions III and IV Caucuses - Continental Ballroom 4-5 Regions V and VI Caucuses - Continental Ballroom 4-5 Regions VII and VIII Caucuses - Golden Gate Ballroom 2-3 Regions IX and X Caucus - Golden Gate Ballroom 4-5 Annual Meeting Dinner 5:30 pm 7:30 pm Thirsty Bear Brewing