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How to Use SBA 504 Loans for Renewable Energy Projects
How to Use SBA 504 Loans for Renewable Energy Projects
SBA 504 Loans for Renewable Energy Projects

How to Use SBA 504 Loans for Renewable Energy Projects

How to Use SBA 504 Loans for Renewable Energy Projects

Did you know that by incorporating energy efficiency or renewable energy solutions into your building projects, you can gain more capital on top of saving on utility costs? It’s a strategy that the U.S. Small Business Administration (SBA) and the Department of Energy (DOE) are actively promoting. Their goal is to inspire small business owners and entrepreneurs to leverage what the SBA’s Grow (504) Loan Program offers for energy efficiency projects. Here’s how you can use this incredible opportunity to go green to save green in your energy-eligible 504 projects.

What is the SBA Grow (504) Loan Program and its Requirements?

The SBA Grow (504) Loan Program is tailored for small businesses needing financing for real estate and equipment purchases, ideal for planning larger projects that promise a positive community impact. To qualify for additional SBA 504 loan support for renewable energy projects, your project must meet specific criteria that ensure significant contributions to energy efficiency or renewable energy generation. This includes:

1. Reduced Energy Consumption: 

The key to this qualification path is demonstrating a tangible decrease in energy usage:

  • For existing businesses upgrading facilities or equipment, there must be a documented reduction in energy consumption by at least 10%.
  • Newly constructed or acquired facilities must replace existing ones, showing at least a 10% energy consumption decrease on a square footage basis, and remain in the local area of the original facility.

2. Renewable Energy Generation:

Projects must lead to the facility generating more than 15% of its energy.

  • Qualifying upgrades can include introducing renewable energy sources like solar or wind power or switching to renewable fuels such as biodiesel or ethanol.
  • The project’s budget must include costs associated with generating renewable energy or fuels.

3. Sustainable Building Design:

  • Projects incorporating sustainable building designs to reduce fossil fuel use or adhere to low-impact development principles are eligible.
  • This path focuses on the broader impact of your facility’s design on energy usage and environmental sustainability.

Documentation and Compliance

To prove your project meets one of the three qualification criteria, you will need to undergo an energy audit or provide a detailed report from a third party. This documentation should include:

  • A complete description of the facility or facilities involved.
  • Data on current energy usage (in kilowatt-hours or therms) and projected energy usage post-modification.
  • The qualifications of the independent entity performing the audit or creating the report.

Why Opt for Energy Efficiency?

More than just environmental stewardship, investing in energy-efficient solutions offers plenty of benefits, including:

  • Lower Operating Costs: Energy-efficient installations cut down utility expenses and lower maintenance costs over time.
  • Better Indoor Environmental Quality: Upgrades like high-quality HVAC systems and efficient insulation improve air quality and occupant comfort—factors that can contribute to increased productivity and customer satisfaction.
  • Stronger Business Image and Profits: In today’s eco-conscious market, businesses prioritizing sustainability often enjoy enhanced customer loyalty and an improved brand image.

DOE Resources for SBA Lenders

Taking on energy efficiency improvements can be a complicated and time-consuming venture, which is why the DOE and 504 Capital, one of the leading SBA 504 certified development companies (CDC) in Maryland, Virginia, and North Carolina, has developed resources to aid borrowers. These guides provide crucial information on implementing energy-efficient solutions, finding financial incentives, and making a compelling business case for these investments.

What’s Next?

Made permanent by the SBA in May 2016, the SBA Grow Refinance Program permanent (SBA 2016b) grants eligible small business owners broader avenues to refinance their fixed assets and operational expenses. Coupled with the possibility of increased SBA 504 green loan amounts and the support of resources from DOE and NREL, the opportunity has never been better to rethink, redesign, and refinance your business projects for energy efficiency.

Discover how you can leverage this strong combination of financing and sustainable business practice to move your business forward in a greener world. Explore the Grow Loan Program at www.SBA.gov/loanprograms and contact a reputable CDC for more information on small business loans in Virginia, North Carolina, and Maryland.

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