[vc_row][vc_column][vc_column_text]By: Evan Lotz
Small business owners who are looking to grow their business while driving their sustainability goals should apply for the Small Business Administration’s (SBA) 504 Green Loan Program. Through this program, businesses can receive up to $5.5 million in financing to help improve their energy efficiency and overall profit. These loans can support your organization by upgrading company assets and increasing the overall value of the investment.
What is the SBA 504 Green Loan Program?
The SBA 504 Green Loan program is a financing option that presents an incentive for small businesses to increase their building’s sustainability through energy efficiency and/or renewable energy solutions. The program offers up to $5 million in financing per project and can receive a maximum of $16.5 million in aggregate funding. The funding can be increased to $5.5 million if public policy goals are met and can be used for multiple SBA 2nd mortgages. Loans can also be used to purchase land (including existing buildings), improve company assets, begin new construction projects, and renovate or upgrade existing buildings.
How to Qualify
Below are the four main qualifications the SBA requires for you to qualify for a green loan.
- Be a for-profit company
- Be 51% or more owner-occupied
- Have a tangible net worth of less than $15 million
- Have an average net income after federal income taxes (excluding any carry-over losses) from the preceding two completed fiscal years of $5 million or less.
Requirements for Financing
In addition to the qualifications above, SBA requires that all projects must meet one of the following sustainability goals.
- Reduce energy use by at least 10% – Improvements to the building occupied by the borrower must show a minimum of 10% reduction to energy usage (compared to historical consumption).
- Generate at least 15% renewable energy
- LEED Certification – If historical energy consumption records for the property are not available, a project can qualify if it is built or retrofitted using LEED certification standards through its completion of upgrades.
Benefits of the Program
Following the sustainability requirements of the program can lead to long-term financial benefits for your organization. Benefits include reduced operating costs, lower utility bills, improved indoor air quality, and lower carbon emissions. The SBA 504 Green Loan Program offers below-market, fixed interest rates offered at up to 90% financing. Organizations can qualify for 10, 20, and 25-year amortization terms.
See the Savings in Action – Energy Efficiency Project Example: An LED lighting upgrade in a medical office building led to an annual savings of more than $24,000 with project payback in just 1.9 years. Utilizing an equipment lease or on-bill financing through your 3rd party utility supply bill eliminates the need to use any upfront capital and will generate more than $5,000 in new annual positive cash flow for the owner. Implementing this project will reduce the building’s carbon footprint by more than 133,000 pounds of CO2 annually.[/vc_column_text][vc_empty_space height=”20px”][vc_cta h2=”Is the SBA 504 Green Loan Program for you?”]In times when retaining capital is a priority for small business owners, financing energy-efficiency projects is a viable option to improve an organization’s bottom line. Working with an energy consulting firm that specializes in reducing energy expenses and operating costs can help make this process much easier and productive.
Contact the EEP team today to help discover ways to reduce your energy costs.[/vc_cta][vc_separator][vc_column_text css=”.vc_custom_1595261243757{margin-bottom: 0px !important;border-bottom-width: 0px !important;padding-bottom: 0px !important;}”]Evan Lotz is a summer intern at Evolution Energy Partners. He is a rising sophomore at Lafayette College studying Economics and Finance.
References:
https://www.capitalcdc.com/public/upload/files/general/Green_Energy_Insider_Guide.pdf
https://www.sba.gov/offices/district/mt/helena/resources/lenders-financing-504-way
https://cdcloans.com/sba-504-green-energy-loan/
https://ffcfc.com/loan-programs/the-sba-504-loan-program/504-green-loans/
https://www.ptrenergy.com/areas-of-expertise/sba-504-green-loan/[/vc_column_text][/vc_column][/vc_row]