For SBA lenders
Short answer
Identified remediation costs must be factored into the project costs, either funded by the borrower's equity, included in the loan amount if eligible, or fully funded by the seller, and must be satisfactorily addressed before or at closing.
Environmental remediation costs are a critical consideration. The lender must ensure these costs are adequately addressed. They can be part of the project's eligible uses of proceeds if necessary for the business, covered by the borrower's capital, or the seller may be required to cover them. The SBA generally requires that environmental risks be mitigated to an acceptable level prior to or concurrent with loan closing.
A Phase II ESA reveals $50,000 in soil remediation is needed. The lender may structure the loan to include this cost if it's an eligible use of funds, or require the borrower to bring an additional $50,000 in cash equity, or require the seller to escrow funds for remediation. The work must be completed and certified.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
7(a) Loan Program — Terms, Conditions, and Eligibility
U.S. Small Business Administration · Official SBA source
SOP 50 10 - Lender and Development Company Loan Programs
Last checked 2026-06-13. Official sources control — verify before relying on any rule for a live deal.
Last reviewed 2026-06-13 · SBA sources checked through 2026-06-13. DealRoom analysis of public SBA 7(a) lending records (FY2020–present). Grounded in the current SBA rulebook; verify against the official sources above before relying on it for a live deal. Not legal, tax, or financial advice, and not an approval decision.
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