In most every instance, it is the Third Party Lender who engages the appraiser to conduct an appraisal of the real estate project. Prior to closing, the SBA must approve the Appraisal Report as meeting its requirements.
To meet SBA requirements, appraisal reports must be prepared using one of the following options to be in compliance with Uniform Standards of Professional Appraisal Practice (USPAP):
A Self-Contained Appraisal Report OR A Summary Appraisal Report
CTCIC should be an intended user under the terms of the Appraiser’s engagement and the Appraisal must be addressed to the Third Party Lender AND
CTCIC and/or US Small Business Administration
2315 Whitney Avenue, Suite 2B
Hamden, CT 06518
Finally, if ordering a “to be built” appraisal for a construction project, the engagement must require the appraiser to issue a statement post-completion that the project was built with only minor deviations (if any) from the plans and specifications upon which the original estimate of value was based
In most every instance, it is the Third Party Lender who engages the environmental consultant to conduct the environmental due diligence for the real estate project. Prior to closing the SBA must approve the environmental due diligence as meeting its requirements.
Type of Environmental Required
Based on CTCIC’s experience, the minimum acceptable level of environmental investigation is a records search with risk assessment. Depending on the site location or prior use of the property, a Phase I and/or a Phase II Environmental Risk Assessment (ESA) may be required.
Shelf Life of Reports
SBA will accept a Record Search with Risk Assessment completed up to one year prior to submission to the SBA. SBA will accept a Phase I ESA completed within 180 days of the aquisition of the SBA 504 Project Property. The SBA will also accept a Phase I ESA completed within one year of aquisition provided components of the Phase I ESA (interviews, visual inspection, record review and LEP declarations) are updated within 180 days prior to aquisition.
A Reliance Letter must accompany the environmental report when submitted to the SBA. (download the Environmental Reliance Letter Template). These terms are non-negotiable – SBA will not accept the environmental report without the signature of the LEP on this Reliance Letter form.
Existing Environmental Issues
Environmental conditions revealed in the due diligence process must be addressed prior to closing. In order to close the CTCIC 504 Loan before all environmental issues are addressed, CTCIC must (1) Obtain an estimate of the cost of the remediation must be obtained in writing from the environmental company, (2) Establish an escrow account of 150% of the cost of the estimate must be set up, and (3) Obtain SBA approval of the remediation plan and escrow account.
Under certain circumstances an Environmental Indemnification Agreement may be required.
SBA guidelines require a post-construction inspection prior to closing for ground-up construction projects and for major renovation projects, completed by the original appraiser which states that the building was built according to plans and specifications with only minor modifications (if any).
CTCIC is required to reconcile construction project costs. Once the construction/renovation is complete, the Third Party Lender must submit a bank disbursement file to CTCIC outlining the disbursement of their loan proceeds for ground-up construction or major renovation projects. CTCIC must be able to reconcile the project costs using the disbursement file and any back-up documentation prior to closing the CTCIC 504 Loan. Note – Project cost allocations can be adjusted based on final disbursement records provided funds were used for eligible purposes.
Feel free to contact us throughout the process with your questions/concerns