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SBA now requires the appraisal to be addressed to both the Third Party Lender AND to the SBA

When issuing your appraisal engagement letter, please instruct the appraiser to include the U.S. Small Business Administration as an authorized user of the report.

PLEASE NOTE: Value must be based on Fee Simple (not Leased Fee)


If building improvements are involved with this project, please provide the contractor’s bid to the appraiser, and have the appraiser provide three values in the report:

1) market value on an as-is basis for land only;
2) market value on an as-is basis for land & building; and
3) market value of land & building at the completion of improvements.

Lastly, please instruct the appraiser to use at least 2 of the 3 appraisal methods (cost, sales, and income approaches). If the appraiser does not include all three approaches, the appraiser must include in the report why the other approach was not used. If cost approach is not used in the report, the appraiser must state fair market value of land (for insurance determination purposes on the building).

If the project involves improvements that will be equal to or greater than 1/3 of the cost of the land & building, then please instruct the appraiser to complete a Post-Construction Certification form once the construction is complete. (See form below)

SBA requires a real estate appraisal if the estimated value of the Project Property is:

1) Greater than $250,000; or
2) $250,000 or less if such appraisal is necessary for appropriate evaluation of creditworthiness.

The appraiser must be:

1) Independent and have no appearance of a conflict of interest (such as a direct or indirect financial or other interest in the property or transaction); and
2) Either State-licensed or State-certified with the following exception: when the Project Property’s estimated value is over $1,000,000, the appraiser must be State-certified.

The appraisal report must be prepared in compliance with Uniform Standards of Professional Appraisal Practice (USPAP) and use one of the following options:

1) A self-contained appraisal report; or
2) A summary appraisal report.

To comply with SOP requirements, it is recommended that the appraiser is provided a copy of the title report so that the appraiser can consider the impact that covenants and other restrictions recorded against the collateral may have on its value and marketability.

Post Construction Certification

A review of the NAICS code for the property’s current and known prior uses is required by CDC. If there is a code match to SBA’s Environmentally Sensitive Industries list, the Environmental Investigation must begin with a Phase I.

Steps for an Environmental Investigation

NAICS Codes of Environmentally Sensitive Industries

All Transaction Screen Assessments, Phase I and Phase II reports MUST be submitted with a Reliance Letter. This Reliance Letter certifies among other things that the EP’s firm is covered by E&O liability insurance with at least $1,000,000 coverage. 

Indemnity Agreement

Environmental Questionnaire & Disclosure

An Asbestos and Lead Paint Certification must accompany an environmental study for structures built prior to 1980.


Gas Station Requirements:

If the NAICS code begins with 447 (gas station with or without a c-store), a Phase I report is required at minimum.
All USTs, lines and related equipment located on the property must be tested within twelve (12) months prior to loan closing. Any defective equipment must be replaced or repaired prior to closing and seller credits are not acceptable.
An SBA Environmental Indemnification Agreement will need to be executed from any oil company, seller, or subsequent owners of any contaminated property releasing any claims and causes of actions against SBA, CDC, and Lender.
In addition, SBA will need to review and approve all Dealer or Jobber agreements.

Dry Cleaning Facility Requirements:

On-site dry cleaning facilities, which may have utilized chlorinated solvents such as tetrachloroethene (PCE) and trichloroethene (TCE) and/or petroleum-based solvents in the course of their business operations, may present significant clean-up costs if these contaminants have entered the soil, soil vapor and/or groundwater. Prudent lending practices dictate and SBA requires that any Property with on-site dry cleaners, whether currently in operation or operated historically at the site, that did, do or likely used chlorinated and/or petroleum-based solvents undergo a Phase II Environmental Site Assessment in addition to a Phase I which would be required due to the NAICS code match. Any soil and groundwater contamination and soil vapor intrusion must be addressed. A Phase II performed in connection with an on-site dry cleaning facility must be conducted by an independent Environmental Professional who holds a current Professional Engineer’s or Professional Geologist’s license and has the equivalent of three (3) years of full-time relevant experience.

Businesses with a Limited or Special Purpose Property must contribute at least 15%


For any business with (including affiliates) that has an outstanding debenture for a Project involving a Limited or Special Purpose Property, for each subsequent Project involving a Limited or Special Purpose Property, the borrower must contribute 20%.

Below is a list that contains examples of properties that SBA considers to be a Limited or Special Purpose Property.
This list is not intended to be all-inclusive and SBA may determine that other properties meet the Limited or Special Purpose Property definition.


i) Amusement parks;
ii) Bowling alleys;
iii) Car wash businesses;
iv) Cemeteries;
v) Cold storage facilities where more than 50% of the total square footage is equipped for refrigeration;
vi) Dormitories;
vii) Farms, including livestock and dairy facilities;
viii) Funeral homes with crematoriums;
ix) Gas stations;
x) Golf courses;
xi) Hospitals, surgery centers, urgent care centers and other health or medical facilities;
xii) Hotels, motels, and other lodging facilities;
xiii) Marinas;
xiv) Mines;
xv) Nursing homes, including assisted living facilities;
xvi) Oil wells;
xvii) Quarries, including gravel pits;
xviii) Railroads;
xix) Sanitary landfills;
xx) Service centers (e.g., oil and lube, brake or transmission centers) with pits and in-ground lifts;
xxi) Sports arenas;
xxii) Swimming pools;
xxiii) Tennis clubs;
xxiv) Theaters;
xxv) Wineries