Most of us don't think of federal agencies as being particularly earth conscious. But long before it was cool to be green, the Small Business Administration in its policies was committed to the protection of the natural environment. Not only does the SBA now offer programs dedicated to helping businesses involved in conservation and energy production, but the fact is, all SBA loans have an underlying green element. Part of the approval process for any loan is an environmental assessment by a participating SBA lender. Where ecological concerns exist, those issues must be resolved before a loan can go forward.
The Small Business Administration also offers two loans specifically for environmental capital assistance.
Here is an overview.
Energy Loan Program (ELP). The ELP is for small business owners who wish to engineer, manufacture, distribute, market, install or service energy measures.
Some of the projects that qualify for the ELP include:
- Solar thermal equipment
- Photovoltaic cells and related equipment
- Hydroelectric equipment
- Wind energy conversion equipment
- Equipment that produces energy from wood, bio waste, grain or other biomass energy sources
- Cogeneration equipment
- Services such as engineering, architecture, and consultation necessary or appropriate to get any of the above up and running
Projects that do not appear on this list are not necessarily ineligible. With rapidly changing technology the list is constantly evolving. Borrowers that are interested in projects are not listed should consult the SBA for clarification.
The Pollution Control Loan Program (PCLP). The PCLP assists small businesses in the planning, design or installation of pollution control facilities. The SBA defines a pollution control facility as "real or personal property that is likely to help prevent, reduce, abate, or control noise, air or water pollution or contamination by removing, altering, disposing or storing pollutants, contaminants, wastes or heat and such real or personal property which will be used for the collection, treatment, storage, utilization, processing or final disposal of solid or liquid waste. Any related 'resource recovery' property (recycling) is also eligible when it is stated to be useful for pollution abatement by a local, state or Federal environmental regulatory authority."
Loan Parameters for the ELP and PCLP
- The maximum loan possible under the ELP or the PCLP is $2,000,000.
- There is no minimum, though the SBA says it is hard to get approval on loans of less than $75,000.
- Loans are for terms up to 25 years.
- The maximum interest rate is 2.75% over prime, but typically the rate is closer to 1 to 1.5% over prime.
- Borrowers pay fees totaling 3 to 3.5% (which includes a loan guarantee fee).
- Collateral under either program is generally real estate or equipment.
- Time needed to complete a loan is about 15 business days.
- If the maximum amount under the ELP or PCLP is not sufficient to finance a project the borrower may be able to apply also for a standard loan through the SBA.
- For a loan through the ELP, proceeds can be used to acquire property, conduct research and development, and to provide working capital. PCLP loan proceeds can only be used to plan, design, or install a pollution control facility.
Standard Application Information
Applying for a loan through the Small Business Administration, whether standard or under the ELP or the PCLP is a complicated process requiring a great deal of documentation and narrative. In the current sluggish economy, the SBA is reaching out to borrowers by teaming up with the AICPA to spread the word about the availability of funds. The SBA recognizes that accountants are in the best positions to spot high quality candidates for small business loans, which is why the agency is relying on these professional advisers for referrals.
Though all small businesses are invited to apply, the SBA has funds set aside for targeted groups, including minority and women-owned businesses, and those in inner city and rural areas with high unemployment and high poverty. Businesses and individuals interested in any kind of SBA loan will find the process much easier with the help of their accountants. The heart of the application is the business plan, which requires personal and business financial statements including cash projections. For existing small businesses seeking loans, chances are their accountants already have or can easily produce the financial documents.
The help that is available from the SBA is not limited to loans and loan guarantees. The SBA.gov Web site is a wealth of resources, many of which are free. Accountants who have clients interested in starting or expanding small businesses should encourage them to spend time on the Web site and at SCORE.org (linked on SBA.gov) so they can get review the requirements of an SBA loan and check out the long list of online courses available.
You can read more details about the SBA's environmentally friendly loan programs.