If you’re buying, building, or upgrading a commercial property, energy efficiency can do more than lower your utility bills. It can also help your project qualify for SBA 504 financing and even unlock higher loan limits.
Here’s how SBA 504 Green loans work and how to tell whether your project could qualify.
What Is an SBA 504 Green Loan?
An SBA 504 Green loan isn’t a separate loan program. It’s a standard SBA 504 loan for a project that meets one of the SBA’s energy-related public policy goals.
Every 504 loan has to meet either a job creation goal or a public policy goal. Green projects fall under the public policy side. That matters because it gives you another path to eligibility, plus some added benefits.
You still get the core advantages of a 504 loan:
- As little as 10% down
- Long-term fixed rates for 10, 20, or 25 years on the CDC portion
- Financing for real estate, construction, and major equipment
Which Projects Qualify?
Projects typically qualify as green in one of two ways.
1. Reducing energy consumption by at least 10%
If your project cuts the building’s energy use by 10% or more, it can qualify. Common examples include:
- High-efficiency HVAC systems
- LED lighting upgrades
- Better insulation and building envelope improvements
- Energy-efficient windows and roofing
- New construction built to energy-efficient standards
2. Generating renewable energy
Projects that produce renewable energy on-site can also qualify, such as:
- Solar panels
- Wind turbines
- Geothermal systems
- Other renewable energy sources
Utah’s long stretches of sunshine make rooftop solar an especially practical option for many business owners here.
The Big Benefits of Going Green
Higher loan limits
A standard 504 loan allows up to $5 million in SBA financing. Projects that meet an energy public policy goal can qualify for up to $5.5 million per project, and businesses may be able to finance more than one qualifying project.
No job creation requirement
Normally, 504 loans need to create or retain a certain number of jobs based on the loan amount. Green projects that meet an energy goal don’t have to meet that job creation requirement. That can make a big difference for businesses with smaller teams or highly automated operations.
Lower operating costs
Energy-efficient buildings cost less to run. Lower utility bills improve your cash flow every month, which helps offset your mortgage payment.
Stack with other incentives
Green 504 projects may also be eligible for utility rebates and federal tax incentives. In Utah, utility efficiency programs can help offset the upfront cost of qualifying upgrades. Talk with your tax advisor about what applies to your project.
How to Show Your Project Qualifies
To use the energy public policy goal, you’ll need documentation showing your project meets the requirement. That usually includes:
- An energy audit or assessment comparing current energy use to projected use after the project
- Specifications for the equipment or construction you’re installing
- Renewable energy system details, such as the size and expected output of a solar array
Your CDC will help you understand what documentation is needed for your specific project.
Is a 504 Green Loan Right for You?
A green 504 loan could be a good fit if you’re:
- Buying a building and planning major energy upgrades
- Constructing a new building and want to build efficiently from the start
- Adding solar or other renewable energy to a property you own
- Close to the standard 504 loan limit and need a little more room
- Running a lean team that may not meet job creation requirements
Talk With Our Team
Intermountain Business Lending helps Utah business owners structure 504 loans that make the most of every advantage the program offers, including green energy goals. If your project includes energy upgrades or renewable energy, let’s talk about whether it qualifies.
Run your numbers with our SBA 504 loan calculator, or contact our team to get started.