Low-Interest Loans to Small Businesses to Achieve Sustainability/Cost Savings

"What our first set of goals were that were 10-year goals started in 1996. Energy efficiency was a big part of that. In that period of time, we saved almost $5 billion around energy efficiencies. So there’s an economic story, but there’s also an environmental story in that."  David Kepler, The Dow Chemical Company, Chief Sustainability Officer

Last week, I wrote about a Michigan's "Retired Engineer Technical Assistance Program" or "RETAP,"  which provides engineers who will conduct an on-site assessment for pollution prevention and/or energy assessments at no cost for small businesses in Michigan.  While the assessments and advice are free, the cost to implement the recommendations of a RETAP assessment or an independent assessment for pollution prevention (P2) or waste reduction program is not.  The good news is that Michigan has a Small Business P2 Loan Program that can provide low-interest loans (up to five percent) to implement these types of program for small businesses.

The Michigan legislature created the small business P2 assistance loan fund, which leverages state money with private borrowing for projects up to $400,000.  The State and private lenders split the cost of the project 50-50, with the State allowed to invest no more than $200,000 per project (although the private lender can, if it chooses, provide more than $200,000 for projects that exceed $400,000).  The type of small business that can take advantage of this program is quite expansive, including any business that is "not dominant in its field," is independently owned or operated by a person who employees less that 500 people, and is considered a "small business concern" pursuant to federal law.

The types of projects that qualify under this program are quite diverse.  They include the following types of activities: modification of equipment or technology; modifications to processes or procedures; reformulation, recycling or redesign; substitution of raw materials, including closed-loop recycling; energy conservation; employee training; on-site water conservation; and improvements pursuant to the Michigan Agriculture Environmental Assistance Program.  With some additional requirements, these loans can also be used for energy production systems like methane digesters or biomass gasification.

The purpose of the program is to provide funding for projects that reduce or eliminate waste, reduce energy use or minimize public health hazards - which often times means saving money through reduced costs.  You will need to provide information regarding the estimated benefits of the program, which, depending on your project, would include water conservation, waste reduction, energy conservation or fuel substitution, material use reduction or substitution or environmental and public health and safety benefits.  You can get an idea of what types of projects have been approved and what lenders have been involved here.

So, you have a RETAP or your own assessment, identified a project that qualifies and you're raring to go - so what's next?  You can discuss your project with the Michigan Department of Environmental Quality (MDEQ) in an optional pre-loan review.  Next, select a contractor, obtain a price quote and establish a schedule for the project.  Once that information is available, submit an application to MDEQ.  You will also need to work with your lender, which has the primary responsibility of establishing your creditworthiness and ability to pay back the loan, and your lender can submit your application for you.

If your project is approved, the paperwork continues.  You will need to submit a Supplemental Agreement, Lender Agreement, the lenders loan agreement or promissory note, and a loan amortization schedule to MDEQ.  Once these agreements and documents are prepared, the lender will schedule a closing and submit the executed loan documents to MDEQ.  At that point, MDEQ will sign their agreements and disburse its share of the loan amount and you must eventually submit a project summary within 90 days of completion.

This program is a public-private partnership that leverages public and private money to invest in Michigan's small business.  At the end, the small business likely sees an improvement in its bottom line and Michigan benefits because of pollution reduction or elimination of waste - it's a win-win proposition.

The author, Saulius Mikalonis, is an environmental attorney with over 25 years of experience in the Bloomfield Hills offices of Plunkett Cooney.  He is also the author of The Green Blawg, in which he writes about environmental law issues for the non-lawyer.  In addition to practicing law, Mr. Mikalonis is an adjunct professor at the Thomas M. Cooley Law School, Auburn Hills Campus, at which he teaches a course entitled "Sustainable Development Law & Policy" and a former Board Member of the Detroit Regional Chapter of the United States Green Building Council (USGBC).
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