Think GREEN with SBA 504

Think GreenThere is a BIG – GREEN secret within the world of Commercial Real Estate financing.  Most of you probably know about the SBA 504 Loan Program which is used by small businesses purchasing owner occupied commercial real estate and administered by Certified Development Companies (CDCs).  What most of you probably don’t know is that there are incentives for those businesses able to achieve GREEN Initiatives.  What incentives you ask?  How about qualifying for more money.  $5.5 million PER PROJECT in fact.  So how does one qualify for more money?  Well that’s exactly what we’re here to talk about.

First Things First 

To qualify for the additional moneys available within the SBA 504 loan program, you need to first qualify for an SBA 504 Loan.  With an SBA 504 loan, up to $5 million total can be lent.  Both SBA 504 loans and SBA 7a loans count towards this total.  This is why qualifying for $5.5 million PER PROJECT is a great option for businesses such as those that will have or currently have multiple locations, those wanting financing for large projects or those that just want to have less of an impact on the environment.

Public Policy Goals

Once you know that you qualify for an SBA 504 loan, let’s see if you qualify for the $5.5 million per project.  To qualify for the additional per project money a company must meet 1 of 3 Public Policy goals outlined by SBA.  Those Public Policy goals are – 

  1. Reduction of energy consumption by at least 10%. This Public Policy Goal is a great option for those businesses looking to upgrade and replace a current facility, to a more energy efficient one that reduced their energy consumption by the required 10% within the same local area.
  1. Increased use of sustainable design. An example of meeting this Public Policy Goal would be a business building a structure with low impact materials.
  1. Plant, equipment and process upgrades of renewable energy sources. This 3rd Public Policy Goal is where such items as solar panels would fit in.  An example of this would be if a business was purchasing a building and wanted to also include solar panels that would create its own electricity.

For any Public Policy Goal that is met, SBA does require supporting documentation through either an energy audit, engineering report or other professional evaluations deemed appropriate by SBA.   These reports would be submitted to SBA at the time your CDC submits your loan request for approval.

So to recap, by meeting and achieving 1 of the 3 Public Policy goals above a business qualifies for $5.5 million PER PROJECT by the GREEN Initiative portion of the SBA 504 Loan Program.  Some important things to keep in mind are first, a business needs to be eligible for an SBA 504 loan before they can meet any Public Policy Goals and second, for any Public Policy Goal met there needs to be supporting documentation provided.

Think SBA 504’s GREEN Initiative option is right for you?  Find your local CDC (Certified Development Company) for more information.

By Stephanie Gerringer, Executive Director

2 Commentsto Think GREEN with SBA 504

  1. Hi, I am a real estate broker, a client is buying a hotel and seeking financing thru a 504 green energy loan, we are looking for some ideas on how to meet the SBA requirement for energy efficiency without installing solar panels, can you recommend a solution.. please advise thanks

    • Megan Jewell says:

      There are a number of options available to your client please give us a call so we may discuss them in detail with you.

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