SBA Goes Green With Loans for Small Businesses

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Small business owners thinking of incorporating green technologies at their facilities are now eligible to borrow more money to make it happen. The U.S. Small Business Administration (SBA) is now offering special financing to small business entrepreneurs who go green through their SBA 504 Loan Program.

The SBA 504 Loan Program has been assisting small business entrepreneurs for over 25 years by providing fixed rate, long-term financing for the purchase, construction and renovation of commercial real estate. SBA 504 loans provide a source of long term capital with typically only a 10% down payment from the small business borrower. The rest of the financing is arranged by a Certified Development Company (CDC) securing an SBA 504 loan for up to 40% of the project costs and a lender providing the remaining 50% of the project funding.

The maximum amount of an SBA 504 loan is normally $1.5 million unless a project meets a specific public policy goal such as assisting a business in a rural area or a minority, veteran or woman-owned business. If a project meets a public policy goal, then the SBA 504 loan can go higher. The good news is that as part of the Energy Independence and Security Act of 2007, Congress added three new public policy goals to the SBA 504 Loan Program to assist businesses willing to invest in going green.

For existing small businesses wishing to purchase or construct facilities incorporating energy saving technologies or retrofit existing facilities resulting in a 10% decrease in energy consumption, they are now eligible to obtain SBA financing of up to $4 million for the project. The total cost of a “green project” can go as high as $9 million using the new public policy goal since the $4 million cap on the SBA 504 loan represents only 40% of the project cost. Some of the most common ways to achieve a 10% decrease in energy consumption now include improved insulation and lighting, improved HVAC, energy efficient windows and a number of other design features. New energy conservation technologies continue to be developed to make buildings and businesses more energy efficient so even more options will no doubt become available in the future.

In addition, small businesses generating renewable energy such as solar, biomass, hydropower, ocean thermal, geothermal and wind are also eligible to finance their real estate purchase or construction project with up to $4 million from the SBA 504 loan program. Generating renewable energy does not need to be the company’s primary business activity, just a method of meeting its own energy needs. Projects in any industry could, for example, purchase solar panels for their own use and qualify for an SBA 504 loan of up to $4 million.

The last type of small business projects that qualify under these new green business incentives are those small businesses that incorporate sustainable design into their facilities as defined by the Leadership in Energy and Environmental Design (LEED) standards and the Green Building Certificate Institute. Working with qualified architects and engineers to create a "green building" will make a small business eligible for an SBA loan for up to $2 million in SBA 504 financing.

This is great news for small business entrepreneurs who have been considering the purchase or construction of a facility with an eye toward energy conservation. Incorporating energy efficient technologies today qualifies these businesses for special financing now as well as saving money in the long term.

About the National Association of Development Companies (NADCO)

Created in 1981, the National Association of Development Companies is the trade association for America’s Certified Development Companies (CDCs). Certified by the U. S. Small Business Administration, CDCs are community-based economic development organizations that serve their local communities and states, and are dedicated to the promotion of small business expansion and job creation through SBA’s 504 Loan Program. In addition to the 504 program, many CDCs also provide small businesses with access to other Federal, state and local economic development loan programs.

Based in the suburbs of Washington, D.C., NADCO provides legislative and regulatory support for the 504 Loan Program on behalf of CDCs, the program’s lending partners (including first mortgage lenders, attorneys and others allied to the industry), and 504 small business borrowers. For more information, please call (703) 748-2575 or visit


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