Energy bill promises lower-cost biz loans

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WASHINGTON, D.C. (FORTUNE Small Business) -- The Small Business Administration (SBA) and other government agencies are currently at work fleshing out plans for the new small-business training and grant programs mandated by the sweeping, years-in-the-making energy bill signed into law last month by President Bush.

The Energy Independence and Security Act of 2007's major focus is on long-term measures to reduce energy consumption, such as more stringent fuel-economy requirements for cars and light trucks and mandated increases in ethanol production. But scattered in the fine print of the 822-page bill are several provisions aimed at small businesses, the primary one of which is a loan-expansion program that reduces the fees and speeds up processing time for SBA loans earmarked for projects that increase a business's energy efficiency.

The SBA's 7(a) loan program, which matches eligible small companies with loans from commercial lenders, will be expanded to include loans for projects that will reduce a company's energy consumption by at least 10 percent. Small businesses can get up to $2 million through the SBA's basic 7(a) program and $350,000 through its express-loan program, which turns applications around within 36 hours.

The SBA will also begin testing out a two-year pilot program that will cut fees on 7(a) loans by 50 percent for energy-efficiency projects. Those fees currently range from 2 percent to 3.75 percent of the loaned amount.

But how soon these new loan programs will actually be operational remains an open question. The SBA is now reviewing the provisions and making plans for carrying them out, but isn't committing to a timeframe for implementation, according to agency spokeswoman Christine Mangi.

SBA faces deadlines

The SBA has dragged its feet on the past on similar mandates. The Energy Policy Act of 2005 ordered the SBA to develop various energy-efficiency training and support programs that have not yet been initiated: "This is not something they have taken to heart in the past," says Kyle Kempf, government affairs director at the National Small Business Association, an advocacy group.

This time around, Congress added deadlines to its legislation, something the 2005 energy act lacked. The SBA has until Dec. 31, 2008, to submit to Congress a plan to implement programs for assisting small-businesses in adopting energy efficient building fixtures and equipment.

The SBA is also under orders to develop a $5 million, 4-year pilot program to encourage telecommuting in small businesses, by conducting presentations about the benefits it offers and by reaching out to businesses considering telecommuting options. Additionally, the bill allows the SBA to give grants of between $100,000 to $300,000 annually to one small business development center per state, to enable the centers to conduct "free, one-on-one, in-depth energy audits" to help small businesses reduce their energy costs. The SBA has two years after giving the first grant to report to the House and Senate small-business committees on the program's progress. The chosen development centers must also submit annual reports to Congress detailing how they use the grant money.

The bill is too new for planners to know how it will play out at various small business development centers, according to Don Wilson, president of the Association of Small Business Development Centers. Run by a diverse mix of educational, private and government organizations, the centers provide training and assistance to small businesses on topics such as writing up business plans and dealing with human resources issues.

"Most small business development centers aren't cookie cutters, and they decide what's appropriate for small businesses based on individual geography," Wilson said. He's unsure which centers will be interested in the grants, and how many will apply once application details become available.

Assistance finding spots where businesses can cut both energy use and costs could help some companies boost their bottom line. When energy costs starting skyrocketing at Charleston, W.Va., food service distributorBuzz Food Service, owner Dickinson Gould started looking for ways to save. He decided to buy a cardboard bailer and use a recycler to haul away the waste, rather than filling up four dumpsters a week.

"Instead of paying someone to haul away our waste, someone is paying us," said Gould, who estimates that he's saving about $2,500 a year now that he no longer pays for two additional dumpsters and extra trash hauling.

Now Gould wants to tackle his $4,000 a month energy bill, but he hasn't had the time to properly research options like solar panels or improved insulation on his 30,000 square foot warehouse.

"If the government gave me an incentive, I would do that sooner rather than later," Gould said. Loan programs, like the new ones being organized by the SBA, don't interest Gould as much as measures that would reduce his upfront costs. While making his warehouse more energy-efficient would save money over the long run, it would cost tens of thousands of dollars.

"Small businesses don't always have that kind of luxury to spend," he said.