The Inflation Reduction Act (IRA) promised new financing programs for small businesses looking to embrace green energy solutions. Many had hoped to leverage IRA funding to make their operations more energy-efficient, reduce carbon footprints, and lower utility costs. However, with several IRA green energy financing programs unavailable due to federal funding freezes and legal challenges, it’s important to know that there are still viable, traditional financing options to help small businesses reach their sustainability goals.

In Ohio, small businesses can utilize a range of financing tools like SBA loans, local tax-exempt bonds, and the Commercial Property Assessed Clean Energy (C-PACE) program to fund green energy projects. These established solutions can provide the necessary capital to implement energy-saving technologies, reduce environmental impact, and improve long-term financial health.

SBA 504 Loans: A Gateway to Green Investments

The U.S. Small Business Administration (SBA) 504 loan program is a well-established resource designed to help small businesses finance the purchase or improvement of fixed assets, including energy-efficient projects. This loan offers long-term, fixed-rate financing for projects like solar installations, energy-efficient HVAC systems, lighting upgrades, or building retrofits.

In coordination with a local bank, the SBA 504 loan program can provide up to 90% of the financing for qualifying projects, with the remaining 10% provided by the borrower as a down payment. By taking advantage of this program, Ohio’s small businesses can access lower-interest loans, making it easier to invest in green technologies while maintaining their cash flow.

Why consider an SBA 504 loan for green energy?

• Lower Interest Rates: SBA 504 loans are known for their competitive interest rates, which can be especially beneficial when financing large-scale energy projects.
• Long-Term Financing: With loan terms of up to 25 years, businesses can spread the cost of energy-efficient investments over an extended period, reducing the financial burden.
• Energy Savings: Implementing green energy solutions can lead to significant savings on utility bills, helping businesses offset loan payments over time.

Tax-Exempt Bonds: A Capital Solution for Green Energy Projects

Ohio businesses also have the option of using tax-exempt bonds to finance their green energy projects. These bonds are issued by local or state governments and offer lower interest rates because the investors who buy those bonds benefit from various federal tax incentives. This can be an attractive option for small businesses looking to finance large energy projects like installing renewable energy systems or upgrading to energy-efficient equipment.

Local governments often issue tax-exempt bonds as part of their economic development initiatives. Businesses, as well as larger non-profit organizations, that meet certain criteria may qualify for this financing, which can be used to fund the purchase of equipment, renovations, or energy-saving upgrades. In Ohio, tax-exempt bonds can be accessed through agencies like the Ohio Air Quality Development Authority or almost any port authority, such as the Columbus-Franklin County Finance Authority or Development Finance Authority of Summit County.

Advantages of tax-exempt bonds for green energy financing:

• Lower Financing Costs: Because the bonds are tax-exempt, interest rates are lower, saving businesses money over the life of the loan.
• Longer Payback Periods: Similar to SBA 504 loans, tax-exempt bonds offer extended repayment terms, which can ease cash flow concerns when investing in green technology.
• Community Support: Many municipalities encourage local green energy initiatives, and financing through tax-exempt bonds can help businesses align with these community goals.

Commercial Property Assessed Clean Energy (C-PACE): A Creative Financing Option

The C-PACE program is another innovative way for small businesses in Ohio to finance energy-efficient upgrades. This program allows businesses to secure financing for green energy projects by using the value of their property as collateral. C-PACE financing is repaid through a special assessment added to the property tax bill, which can be paid over 20 years or more.

This tool can be particularly helpful for small businesses that may not have the upfront capital to invest in energy-efficient upgrades but want to achieve significant long-term savings on energy costs.

How does C-PACE work?

• No Upfront Capital Required: C-PACE financing covers 100% of the cost of energy-saving upgrades, eliminating the need for a large upfront investment.
• Long-Term Financing: The repayment period typically spans 20 to 30 years, making it more manageable for small businesses to handle.
• Transferable Financing: If the property is sold, the C-PACE assessment can transfer to the new owner, meaning the financing remains in place even if the business changes hands.

Ohio has a special program called Energy Special Improvement Districts that provide a way to access C-PACE financing. Several local governments and finance agencies manage ESID programs, such as the Toledo Lucas County Port Authority. A map of all Ohio PACE Programs is available from Bricker Graydon.

Combining Financing Tools for Maximum Impact

In many cases, small businesses may find that combining several of these financing options can offer the most comprehensive solution to their green energy needs. For example, a business might use an SBA 504 loan to fund a building renovation and combine it with local government financing or a Jobs Ohio small business grant to lower expenses. By layering these tools, businesses can maximize the benefits of each program and achieve greater sustainability at a more accessible cost.

Final Thoughts

Whether it’s through an SBA 504 loan, local tax-exempt bonds, or the C-PACE program, small businesses in Ohio can continue to invest in green energy and energy efficiency projects without waiting for federal funding to come through.

OSDC is here to guide businesses through these financing options. We are committed to helping local businesses thrive by connecting them with the resources and funding they need to grow sustainably. If you’re looking to make energy-efficient upgrades to your business, we encourage you to explore these options and reach out to us for assistance in navigating the process.

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If you have any questions or need more information about the SBA 504 loans, tax-exempt bonds, or C-PACE, contact OSDC. Let’s make your green energy goals a reality!