Wednesday, January 6, 2010

Financing Your Green Business: A Banker's Perspective

(I am reposting this for the new year) As a banker, I often get requests to find resources for financing a green business. My response to that question, based on my research to date, is that there are limited funding and financing programs available specifically for green business, fewer for small green businesses. Prior to the economic downturn, there was a growing interest in funding of alternative energy businesses by venture capitalists, while there is still interest, investors are favoring lower cost, quicker return energy projects. Interested in learning more about the world of private investment capital? The Green Venture Capital website is an excellent resource.

There are a number of green banks across the country, New Resource Bank in California, Shorebank in the state of Washington and E3 Bank in Pennsylvania (still seeking funding itself). Wells Fargo is one of the traditional banks that has gone beyond constructing green buildings to financing green construction for their clients - committing $2 million in loans towards this endeavor. You will generally find that your bank will be more interested in how much green your business generates than how green your bank is. So you may have to turn to the government for additional investment. While each state has it's own unique programs, I would encourage to you investigate the following funding sources for your green business:

  • Small Business Association (SBA) 7A and CAP (working capital) and 504 programs (capital projects)
  • Community Development Financial Institutions (CDFI's) - non-traditional lenders targeting businesses that provide a benefit to the community, including environmental
  • State Office of Development innovation fund programs (high potential, growth businesses)
  • State Office of Energy Efficiency (tax credit and grant programs)
  • EPA and National Science Foundation Small Business Innovation Research grants
  • Department of Agriculture, Interior and Transportation Small Business Innovation grants
  • City Economic Development Office micro-loan programs
  • Ideal Cafe - Small grants awarded by other entrepreneurs
  • Investment in Energy Efficient Technology/Building Improvements - energy savings reduce overhead expenses, reducing the need for working capital financing. Larger investments can be financing through leases or a performance contract. Click here.
  • Factoring and invoice discounting - involves the sale of or use of your receivables as collateral. Check out the wiki. Definitely speak with your banker or attorney before going this route.
  • Whole Foods Market, finances small local producers
Ready to get started? Click on this link to Business.Gov, complete the form and you will be directed to resources that meet your specific need in your state. It's an awesome tool.
My next post on this topic will be on guerilla fundraising for your green business, because all of these sources require you to post your own equity. So get ready to hustle!
Feel free to contact me at for further information. Please feel free to share your financing sources using the comment form.


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