For SBA lenders
Short answer
If a Phase I ESA identifies a REC as 'de minimis,' the lender must still document their review and concurrence with this finding to ensure environmental risk is properly addressed.
A 'de minimis' REC is a condition that generally does not present a material risk to human health or the environment, and would not typically require further investigation or remediation. However, the lender must review the ESA report, understand the rationale for the 'de minimis' designation, and formally concur with this finding in their loan file. This demonstrates that the environmental risk was identified and appropriately evaluated.
A Phase I ESA for a property collateralizing a $1,000,000 7(a) loan identifies a small, contained oil stain from a past vehicle leak, classifying it as a 'de minimis REC.' The lender's credit analyst would review the report, confirm the environmental consultant's assessment, and include a note in the loan file acknowledging the REC but concurring with the 'de minimis' status, requiring no further action.
Insider move
Lenders must not automatically dismiss any identified REC, even if labeled 'de minimis.' They must understand the potential implications and confirm the consultant's assessment is reasonable. Failure to properly document the review and concurrence of any REC can be seen as inadequate environmental due diligence.
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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