More Loan Money for Smalls Going Green

Small businesses have added incentives to trim energy consumption.

By Jonathan N. Crawford, Researcher-Reporter, the Kiplinger letters

March 11, 2009

The Small Business Administration (SBA) offers great opportunities for small companies interested in going green. Now firms can borrow up to $4 million to build, buy or retrofit facilities with energy saving technology resulting in a 10% reduction in energy consumption.

Moreover, small firms that meet green building LEED (Leadership in Energy and Environmental Design) standards can borrow up to $2 million from the SBA.

In both cases, the fixed rate long-term financing usually involves a 10% down payment, 50% in loans from a bank and 40%, the maximum amount, from SBA, through the agency's 504 loan program.

"Conceivably, any small business that is ready to build their own facility -- whether it is an office building, warehouse, manufacturing plant or even a restaurant -- could borrow more money for the project by incorporating green technologies in the building," says Merril Ferber, a spokeswoman for the National Association of Development Companies.

Two small businesses are taking advantage of the new loan program, which started in January. Comedy Works, a comedy club, will receive a $3.6-million loan for construction of its Greenwood, Colo., venue. A portion will go toward the purchase and installation of solar panels. The panels are expected to cut the club's energy costs by an estimated $7,000 to $8,000 annually.

Jay Finesilver, the club's chief financial officer, says Comedy Works considered making energy saving investments before, but found the costs to be prohibitive. The new loan program "pushed us over the edge," he says. The club plans to install between 50 and 90 solar panels, depending on the panel design it chooses.

Stonehenge, a Utah-based operator of two nursing homes, seeks to access just over $3 million in SBA loan money for the construction of a third facility, which will be in Richfield. Plans call for the new building to rely on 10 or more solar panels, at an estimated cost of $100,000, to power the nursing home's air conditioning and ventilation systems. The panels should help the company trim its energy bill anywhere from 10% to 20% per year, says Cory Robison, the firm's owner and chief financial officer.

Robison says that besides the energy savings, access to more loan money would afford the business greater financial flexibility. "The 504 green loan accommodates us much better," Robison says. "It allows us to fund the loan and to keep ample capital for start-up costs."

Meanwhile, don't forget to check on what your state might offer in terms of green and energy efficiency programs.

Pennsylvania, for example, has $3 million in grant money, through which it provides grants up to $25,000 to small firms that want to trim their energy bill by at least 20% through energy efficiency improvement projects. The grants cover up to 25% of project costs. The state is accepting applications until May 1. Also on tap: the Pennsylvania Sunshine Program, which will provide up to 35% of the costs of residential and small business solar energy projects.

New Jersey also offers financial incentives -- through its Clean Energy Program -- to smalls seeking to enhance energy efficiency. The state offers lump sum payments to businesses looking to replace water heaters, electric chillers, air conditioners, lighting and other energy equipment with high efficiency models approved by the program.

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