Small businesses looking to make their buildings more energy efficient or to transform new buildings are getting a leg up from the Small Business Administration.
Business owners previously had to contend with a $16.5 million cap on so-called “energy public policy” projects under its 504 loan program. But the SBA, in an April 30 procedural notice, said the cap would no longer apply for these energy projects, including ones that would reduce existing energy consumption by at least 10% or generate more than 15% of energy used at the facility with renewable energy. Projects that incorporate designs that reduce greenhouse gases or minimize environmental impacts are also eligible.
There is still a limit of $5.5 million per energy project under the 504 loan program but there is no longer a limit on the number a small-business owner can apply for and receive.
“The updates to the SBA 504 Green Energy Program paves the way for small businesses to embrace green practices while accessing more financial support,” said Kurt Chambliss, executive vice president at Oakland, California-based SBA 504 lender TMC Financing. “There is now no limit to the number of $5.5 million debentures a business can have, as long as they implement SBA-approved energy efficiencies.”
The new memorandum also pulls back on a previous requirement that 504 loans be disbursed within 48 months from the date of approval. It now delegates time constraints to the lender, rather than having the lender automatically refer such loans to the SBA.
Chambliss provided details of how these new loan tweaks would work. For instance, a business owner with an existing SBA 7a loan could still qualify for another SBA 504 loan to purchase a building. To do so, they could install solar panels or replace lighting, windows, and heating and cooling systems to make the building more energy efficient, thus allowing it to qualify.
SBA upgrades loan, business programs
The SBA has, under the Biden administration, been beefing up its loan programs and tweaking its small-business services as part of a wider effort to expand lending to the smallest and most underserved businesses.
Recently, the agency gave its Lender Match toolan improved mobile interface, and small-business owners now can view all of their matched lenders in one place to help compare different organizations.
The enhanced tool will also verify borrowers and screen for fraud in an effort to streamline the lending process, the SBA said inannouncing the upgrades. Additionally, small businesses not matched to lenders will be connected to the SBA’s local network of free advisers.
SBA surety bond guarantees also went up on March 18 for the first time since 2013. That means the SBA is now able to guarantee bid, performance, payment and ancillary bonds of up to $9 million for all projects and $14 million for federal contracts — up from $6.5 million and $10 million, respectively.
The SBA also recently revamped and rebranded its existing 7(j) Management and Technical Assistance Program —now called the Empower to Grow program— which offers customized, one-on-one training and consultation to qualifying small-business owners.
The SBA last yearexpanded the number of lenders in its 7(a) loan programfor the first time in more than 40 years. The SBA also made its Community Advantage pilot program permanent, granting permanent status to the 143 mission-based lenders in the program. The agency previously beefed up its loan limits and streamlined the Community Advantage program to serve more small-business owners.
Those actions are separate from a series of changes theSBA rolled out for its disaster-loan programthat dramatically boosted loan sizes and extended deferment periods for homeowners and business owners alike.
In July, the SBA said it had awarded $169.2 billion in contracts to small businesses in fiscal 2022, an all-time high. Thefederal government awarded $8.7 billion more to small-business contractorscompared to fiscal 2021 and, at 26.5%, it exceeded the Biden administration’s goal of 23% of federal-contract awards going to small businesses.
But theoverall number of prime small-business contractors continued to shrink in that time period, with 62,670 in fiscal 2022, down more than 4% from the 65,428 reported in fiscal 2021. Overall federal contracting spending has been trending upward for years, but the number of small businesses receiving prime contract awards has been declining — meaning a larger share of dollars has been going to a smaller pool of businesses. Between fiscal 2010 and fiscal 2021, the number of small businesses receiving government contracts fell from 121,270 to 65,428.
