For SBA lenders
Short answer
A lender must mandate a Phase I Environmental Site Assessment (ESA) for leased real estate if the loan amount exceeds $250,000 and the property's NAICS code indicates a high environmental risk, or if the environmental questionnaire reveals potential contamination.
SBA policy requires environmental due diligence for loans involving real estate, whether owned or leased. For leased property, a Phase I ESA is generally triggered if the loan amount exceeds $250,000 AND the business's or property's NAICS code is identified as environmentally sensitive. Additionally, if the initial Environmental Questionnaire completed by the borrower or lender indicates potential environmental concerns (e.g., prior use as a gas station, presence of underground storage tanks), a Phase I ESA is required regardless of the loan amount, to mitigate the risk of lender liability.
A lender is processing a $350,000 7(a) loan for a new auto repair shop operating on leased premises. Since the loan amount exceeds $250,000 and the NAICS code for auto repair is considered environmentally sensitive, the lender requires a Phase I ESA for the leased property before proceeding.
13 CFR Part 120 — Business Loans
Office of the Federal Register · Federal regulation
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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