How Small Businesses Can Use SBA 504 Loans for Renewable Energy Projects

Did you know that your business can get multiple SBA 504 loans to help it tackle renewable energy projects? Read on to learn how!

When you’re working on a renewable energy project, chances are you’ll need funding to bring it to the finish line. Good news: the Small Business Administration (SBA) can approve multiple SBA 504 loans to support your green initiatives! Whether you need business financing to improve your building’s energy consumption, build a renewable energy source, or construct “green” buildings, this initiative can give you the support you need.

Already have an SBA loan? Don’t worry! You can qualify even if you have an existing SBA 504 loan or other SBA funding. For example, if you have an existing SBA 504 loan for buying your commercial property and are looking to improve its energy efficiency, your renewable energy project may be eligible for additional SBA 504 funding. Here’s everything you need to know about this SBA initiative.

What your renewable energy project needs to qualify for additional SBA 504 financing

With a standard SBA 504 loan deal, there’s a financing cap of $5.5 million for the SBA 504 portion of the loan. However, your project could be eligible for additional SBA 504 loans if you meet the SBA’s qualification criteria.

Through this initiative, you can get up to $5.5 million in financing for each aspect of your renewable energy projects and energy-efficiency improvements, up to a maximum of $16.5 million! This amount is above and beyond any SBA 504 or other SBA financing you ‘ve already received.

What types of renewable energy projects qualify?

There are three ways your project can qualify for additional SBA 504 loans:

1. The project must result in a reduction of energy consumption by at least 10%. This can’t be used for projects involving new businesses because you need to show improvement over the historical energy consumption for your business.

For a newly constructed or newly acquired facility, you must:

  • Have the new facility replace an existing facility.
  • Have at least a 10% decrease in energy consumption when comparing the new building with the existing building (based on a square footage comparison).
  • Keep the new facility located in the same local area as the existing facility.

For an existing building, the updates must reduce the energy consumption by at least 10%. This is specifically for the building that’s being funded and doesn’t apply to the energy usage of any other facilities that your business uses.

2. The renewable energy project generates more than 15% of the energy used at the facility. The SBA 504 funding must be used for this building with the following details:

  • This includes plant, equipment, and process upgrades of renewable energy sources. An example of this type of upgrade is small-scale energy production through solar or wind power. Another example is switching to renewable fuels such as biodiesel or ethanol.
  • Each qualifying project must generate more than 15% of the energy your business uses at your facility. In addition, all improvements or equipment used to generate renewable energy or renewable fuels must be included in the SBA 504 project costs.

3. Your business is using sustainable building design for its facility. You may also qualify if your business is looking to use sustainable designs for its building. However, these improvements must help reduce the use of greenhouse-gas-emitting fossil fuels or follow low-impact development principles.

Finally, an energy audit must show that your project meets one of the three criteria explained above. This means you’ll need to document your compliance for the program through an energy audit, an engineering report, or any other evaluation approved by the SBA. This audit will document the annual energy usage at the facility or facilities.

At a minimum, the audit or report must include:

  • A description of the facility or facilities
  • The current energy usage (listed in kilowatt-hours or therms, depending on the project)
  • The projected energy usage, which must be based on all modifications and upgrades to the building(s), and all installations of and replacements and modernizations to equipment
  • The qualifications of the independent third party performing the energy audit, engineering report, or other professional evaluation.

SBA 504 financing offers some of the most beneficial terms for commercial projects

An important thing to know about this project financing is that SBA 504 loans offer some of the most beneficial terms you’ll find anywhere. On top of that, this program makes it possible to get funding beyond the typical SBA 504 maximum financing cap! This means that if you’ve been considering making energy-efficient improvements or adding renewable energy projects to your commercial property, you should explore this option.

Pursuit can help you determine the best financing path

Every day, Pursuit helps small business owners like you find the best funding solutions to meet their needs. Our experienced team will work with you to help determine eligibility and leverage opportunities, including this one. Get in touch today and learn more about how we can help you achieve your renewable energy project goals for your business.

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