There are a lot of good reasons for a business to go green. Some of them are purely practical—qualifying for the Small Business Administration’s (SBA) Green Energy Program is a sterling example of a practical incentive. Saving money is another. There are altruistic reasons as well, but regardless of the motivation, environmentally conscious building practices are becoming much more common.
“Greening” your building is more than just an architectural fad. It is the way of the future. Green building is the fastest growing sector of the construction industry. Soon it will be the rule, rather than the exception. Some local governments are already making energy efficiency measures a prerequisite for permitting. Green building will begin to save you money on operating costs immediately, and it may save you a bundle on retrofitting one day. So whether you are starting a new construction project or upgrading your current facilities, green is the way to go.
Save Money and Earn More with LEED
The standard against which all green building is measured is Leadership in Energy and Environmental Design (LEED), a set of rating systems administered by an international network of Green Building Councils (GBC). About 65,000 commercial projects had received LEED designations from the USGBC by the end of 2016. Worldwide there are more than 91,700 LEED projects underway.
LEED buildings have 20% lower operating costs on average, thanks to saved energy, and that is only the beginning of the benefits. If you are renting out part of your space, you can expect to have a lower vacancy rate, as environmental friendliness has become a selling point for renters. A significant portion of the population values ecological concern, and that could very well translate into more tenants in your building and customers for your products.
Green buildings also have a payoff in human resources. Buildings designed to take advantage of natural light and modern, efficient HVAC systems are more pleasant and healthy to work in, leading to greater productivity and higher employee retention rates.
Finally, green buildings have a higher resale value—about 4% above average—thanks to the reasons listed above. An added advantage of having a LEED rating is its transparency. The system gives points for specific features, so buyers receive a detailed understanding of the building’s features from simply reading the LEED designation. This leads to greater confidence and an easier sales process.
Your Building Makes a Difference
Green building makes the world and your community a better place. Buildings that meet LEED Gold level standards, the second highest of four LEED designations, consume 25% less energy and 11% less water than traditional construction, which benefits reduces stress on the local infrastructure and depletion of resources in the region. They also have 34% lower greenhouse gas emissions.
Lighting and insulation have a tremendous impact on electricity consumption. You can upgrade them to conserve energy. Installing solar panels reduces electricity consumed from outside sources, and it can even contribute to the local power system. Many electric companies buy excess power from small solar producers. This benefits the local grid and earns the solar producers some extra money.
Ultimately, it is estimated that LEED-certified buildings in the United States will save $1.2 billion in energy costs, $149.5 million on water, $715.2 million on maintenance and $54.2 million on waste between 2015 and 2018.
The SBA 504 Loan and the Green Energy Program
As if all these incentives weren’t enough, business owners who incorporate energy efficiency or renewable fuel production into their projects can also qualify for the SBA’s Green Energy Program. The program removes the usual $5 million cap on the SBA portion of a 504 loan. Instead, you can take out multiple loans with an SBA maximum of $5.5 million per project.
Renewable energy production is still considered a risky activity by many conventional lenders, but teamed up with the SBA for a 504 loan, conventional lenders (such as banks or credit unions) can provide funding with a much greater level of confidence.
Every 504 loan is a partnership between a conventional lender, a Certified Development Company (CDC)—a nonprofit organization set up to administer the 504 loan program—and the borrower. Your conventional lender will cover at least 50% of the loan total, which is your first mortgage.
Your CDC facilitates a separate Green Energy Program SBA loan of 40% of the project total, up to $5.5 million, at a fixed, below-market rate. This is your second mortgage. You, the borrower, contribute 10% as a down payment. Certain types of facilities are classified as single-purpose properties by the SBA and require a 15% down payment.
To qualify for the Green Energy Program, you can
- Reduce energy consumption by 10% or more
- Produce on-site renewable energy that represents 15% of your energy use (via solar, wind or bio-fuels)
- Provide evidence of energy savings or production (a 3rd party engineering and 3rd party engineering report)
What improvements qualify?
- Energy-efficient building improvements including: improved roofing, energy-efficient windows, doors, and/or building insulation
- Installation of solar thermal heating or cogeneration systems
- Installation of high-efficiency HVAC units or improvement of HVAC system with timers or sensors
- Replacement of lighting with high-efficiency fixtures
The Green Energy Program creates financing opportunities by setting attainable goals that business owners would be happy to meet. It enables business owners who need large or expensive projects, such as hotels and self-storage facilities, to build and maintain them at the highest industry standards for efficiency.
You can find out more about the Green Energy Program from a 504 loan expert at TMC Financing. TMC is a high-volume, Premier Certified Lender with the SBA with over 40 years of experience. Contact TMC today to begin.