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Evergreen Clients Go Green with SBA 504 'Energy Loans'

Since economic stimulus legislation in 2009 provided incentives for small businesses to invest into energy efficiency and other sustainability-minded facility improvements, the Pacific Northwest’s biggest so-called Certified Development Company has helped numerous clients go green.

Non-profit Evergreen Business Capital in Seattle mostly provides taxpayer-guaranteed loans under the Small Business Administration’s SBA 504 loan program. As many subscribers know, these fixed-rate, long-term loans help businesses create jobs through purchases and development of owner-occupied facilities financed at subsidized interest rates.

Loan officers at Evergreen have worked with several borrowers that have taken advantage of stimulus-tied enhancements of the 504 program, allowing financing of investments that significantly improve an owner-user property’s energy efficiency. And these subsidized ‘energy’ loans don’t absolutely have to create new jobs, as has traditionally been a requirement with SBA programs.

Evergreen, headed by president Philip Eng, operates in Washington, Oregon, Alaska and Northern Idaho. Energy loans its officers have recently arranged range from a burger chain restaurant in Anchorage to a data center in Eastern Washington – along with a dermatology clinic, an athletic club, a furniture showroom, a grocery store and more.

And among Evergreen’s borrowers, the approaches to achieving public policy goals through sustainability measures are almost as diverse as the underlying businesses. They near-uniformly achieve at least a 10 percent reduction in energy consumption, one of the requirements for eligibility.

One intriguing project is a new data center featuring state-of-the-art energy- and water-saving technologies that specialty operator TierPoint is erecting with SBA 504 and related financing in Liberty Lake, Wash.

TierPoint’s analysis indicated a traditional chiller-based cooling system at the new facility would consume some 4.5 million gallons of water annually through evaporation, and pollute another 1.5 gallons, reports TierPoint partner Greg Zemp. But the new center’s geothermal cooling system won’t consume or contaminate any water – and the projected energy savings is enough to power 70 homes.

The 504 program funding for the project was bifurcated into separate real estate and equipment components. The former included the $933,000 SBA-guaranteed “debenture” loan through Evergreen toward $2.64 million in facility costs. The equipment loan’s subordinate SBA piece came to $2.18 million toward total costs of $5.62 million.

Senior secured loans from Bank of America/Merrill Lynch totaled $4.1 million – or 50 percent of the overall cost. And TierPoint contributed $1 million.

Because the energy savings amounted to at least 10 percent, the 504 funding amount was “more than is typically available” – not to mention the modest down payment and long-term fixed-rate debt at subsidized interest rates, notes Evergreen senior loan officer Stephanie Arnold.

“This will enable TierPoint to continue to grow and create jobs,” continues Arnold, Evergreen’s point person on the deal.

Several other Evergreen small business clients in the region have also taken out 504 energy loans:

Showroom operator Furniture Factory Direct tapped the 504 program to buy a Lakewood, Wash. building that’s actually smaller – but more efficient – than the facility the company is vacating in nearby Tacoma. Hence it qualified for the SBA-guaranteed loan slightly exceeding $2 million, which ownership combined with the senior bank loan and cash equity to finance the $5 million cost of the 50,000-square-foot facility.

With the project’s estimated creation of 35 new jobs over two years, the 504 loan would have been limited to $1.5 million absent the energy savings qualification. BofA was senior lender on this project as well. Bulgarian immigrants (and husband and wife) Svetlozar Todorov and Ginka Gueorguieva are the company owners.

The Red Robin Gourmet Burgers restaurant in Anchorage’s Northway neighborhood is tapping an $891,000 504 energy loan to relocate from a 1985-vintage structure to a more efficient facility costing $2.9 million. In this climate it’s no surprise the new restaurant boasts a bevy of energy-efficient characteristics such as 50 percent, 33 percent and 18 percent higher respective roof, wall and window insulating values.

The higher-tech windows are expected to reduce solar heat gain by 22 percent. And the lighting system consumes far less energy, and also generates far less heat than the system it’s replacing.

Other Evergreen clients in the Evergreen State qualifying for 504 energy loans due to the 10 percent reduction in energy expenditures include:

Owner-developers of a new Peninsula Market in Lakebay ($944,000 companion loan toward $3.62 million total project cost); and Renovation-minded owners of Bainbridge Athletic Club on Bainbridge Island ($248,000 debenture loan toward $693,750 total cost).

Another client, Dermatology & Laser Center NW in Bellingham, qualified for its $716,000 energy loan (toward $2.4 million total cost) not because of its projects energy reduction, but because of its sustainability-promoting design.

Energy efficiency has clearly been the biggest qualification for energy loans, according to data SBA compiled for SmallBalance.com’s MarketBeat.

Among the 207 energy loans approved last year, 127 borrowers qualified through energy efficiency, compared to 46 that generated renewable fuels and 34 incorporating sustainable design. The efficiency loans accounted for $140.4 million of the year’s nearly $210 million in approved energy loans.