By Alison Boyer

In a One Minute Memo Seyfarth Shaw reviews the new procedure for evaluating and managing environmental risks for Small Business Administration loans.

The SBA has consolidated the procedures for administering “regular servicing” 7(a) loans and those deemed to have “liquidation” status in Standard Operating Procedure (SOP) 50 57 “7(a) Loan Servicing and Liquidation” (SOP 50 57) which took effect March 1, 2013. Chapter 5 of SOP 50 57 revises the guidelines for managing environmental risks associated with SBA loans and expands the application of the guidelines beyond actions taken in connection with a defaulted loan to also include actions taken in connection with regular servicing (i.e., collateral substitution or release). SOP 50 57 does not modify the procedures to be followed in connection with originating a new loan in which case, with respect to environmental due diligence, lenders will likely require an acceptable Phase I ESA.

The guidelines set forth in Chapter 5 of SOP 50 57 could serve as a best practices tool for any lender, whether making SBA loans or not, in assessing and managing environmental risks not only at the origination stage but also in servicing loans.