The Small Business Administration has a plan to stimulate commercial real estate and fund energy upgrades to buildings. SBA 504 Lenders normally benefit from up to a $2 million loan guaranty, now under the new SBA 504 Loan Program for Energy Efficiency Projects, SBA Lenders will enjoy as much as a $4 million loan guaranty. As SBA Loans allow for up to 90% leverage and currently offer rates below 6% these loan types are great opportunities for qualifying borrowers.
To qualify for the additional loan amount the borrower will need to show a detailed plan on how they will increase their energy efficiency by 10% or install a renewable energy source. To accomplish the former, the borrower will need an energy audit of their current building and a plan projecting future energy usage. The energy audit and the action plan are provided by firms such as Partner Energy and do not cost much more than a Phase I ESA.
In the end, the borrower must follow through with the plan, but 10% energy efficiency improvement is easily achievable in most instances. The Energy Audit will likely reveal several relatively inexpensive ways to improve energy usage and the subsequent investments will likely have payback periods of less than 5 years.
The bottom line is that the borrower gets a great loan in terms of leverage and rate and is required to make a no-brainer investment to qualify.
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