State Loan Support Programs Benefit Green Businesses

I've met a lot of green business owners and entrepreneurs.  A consistent challenge is finding affordable financing.  There are state and federal programs that can help lenders feel more comfortable lending to green businesses, but beyond the SBA, these programs sometimes feel like the best-kept secrets of government business assistance.

I plan to cover some of these programs in this post and future posts.

The programs I mention today have just gotten an infusion of  $57 million from the federal government to support state small business loan programs.  The funds are the final tranche of a total of $168 million given to California as part of the Small Business Jobs Act of 2010.

So far, the State has deployed $106.6 of the $168 million to support small business owners, who reported the program helped them create or retain 47,678 jobs through 2014. The remaining federal funds will be disbursed until exhausted, expected sometime in 2017.

The California funds are being deployed through the Small Business Loan Guarantee Program (SBLGP) and the California Capital Access Program (CalCAP) for loan loss reserve support and a Collateral Support Program.  The Loan Guarantee Program is administered by the IBank, and the other programs are administered by the California Pollution Control Financing Authority. (Disclosure:  I used to run CPCFA)

All three programs can benefit almost any small business, but the Collateral Support Program provides enhanced support for green manufacturing and green businesses.

IBank’s SBLGP helps lenders provide loans to small businesses that may have difficulty accessing capital. IBank partners with Financial Development Corporations to guarantee loans up to 80 percent to encourage lenders to provide funds to small businesses.  Businesses with fewer than 500 employees can receive a loan backed by a guarantee for up to 80% of loan value with a maximum guarantee amount of $2.5 million, maximum loan amount of $20 million and maximum guarantee term of 7 years.

The CalCAP loan loss reserve program helps participating lenders build a pooled loss reserve for enrolled loans.  Businesses with fewer than 500 employees can use the enrolled loans for a broad range of business purposes, including working capital.  The maximum covered amount is $2.5 million on loans up to $5 million.  This program has attracted a lot of micro-loans.  About 80% of the enrolled loans are under $40,000 and some lenders are providing loans as low as $500.

The Collateral Support Program may be a very attractive option for green businesses.  The program as already benefitted an anaerobic digestion facility and other green businesses.  For green businesses, participating lenders can receive a cash deposit of up to $2.5 million to serve a collateral for covered loans of $50,000 to $20 million.  The collateral amount can be up to 40% of loan value with an extra 10% in economically distressed areas.  Eligible business have 750 or fewer employees.  Loans can be used for working capital or as "bridge loans" before other loans become available.  Non-green businesses have lower lending amounts and some different terms.  Details are available in the Collateral Support Program Summary.

These programs are generally intended to assist businesses that lenders feel are decent credit risks buy that might fall on the edge or just outside of the normal lending criteria for that lender.  Green businesses, especially those without a long track record, often fall in this category.