SBA Loans: A Way for Small Lenders to Fund Energy Efficiency Projects
A top priority for encouraging more small lenders to fund energy efficiency projects is improved access to Small Business Administration (SBA) loan products, according to a new report from the American Council for an Energy Efficient Economy (ACEEE) and Energi.
The report “Engaging Small- to Mid-Size Lenders in the Market for Energy Efficiency Investment: Lessons Learned from the ACEEE Small Lender Energy Efficiency Convening” lists several recommendations to engage more small lenders.
- Promote incentives, including free or discounted energy assessments and audits, project subsidies, and tax credits or deductions for energy improvement investments.
- Establish credit enhancement from public- or private-sector sources, including loan loss reserve funds, co-participation funds, and energy performance insurance.
- Improve access to SBA loan products.
- Promote the Sensible Accounting to Value Energy (SAVE) Act and administrative rulemaking. Factor energy use into assessments of ability to pay debt obligation.
- Require energy performance data through benchmarking and disclosure, equipment information, and financial performance.
- Engage and network financial regulators to familiarize them with the characteristics and benefits of energy efficiency lending products.
- Enact legislation that establishes credit enhancements in the form of loan loss reserves and guarantees, or loan funds that can be leveraged to serve these purposes.
- Establish measurement and verification as a mandatory standard for government program participation.
- Make upgrades mandatory at the time of sale or transfer.
- Standardize data collection programs and automated modeling tools.
- Establish standard methods for energy efficiency information collection including data on financial, equipment, project, and building performance.
- Document energy efficiency challenges and needs by market segment.
- Estimate transaction costs and total project costs by financing mechanism.
- Conduct education on existing standards such as the Building Energy Performance Assessment (BEPA).
- Establish a document portal.
Earlier this week, Energy Manager Today reported that a paper “Energy Efficiency Financing Program Implementation Primer” found that banks and other lenders have the perception that lending to certain customer segments, including small business, represents too high a risk relative to the potential financial return.
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