5 Action Steps for the Small Business Administration to Lead a National Mobilization to Defeat the Climate Crisis
Originally published January 8, 2021
Joe Biden’s SBA will put small businesses at the heart of a thriving clean energy economy. Under Isabel Guzman’s experienced leadership, the SBA should lead the way with record investments to support innovative clean energy small businesses.
Under Donald Trump, the SBA showed its ability to rapidly move funding to connected fossil fuel companies, including a $10 million loan to a Denver coal company for which former EPA Administrator Scott Pruitt had lobbied. Under Joe Biden, the SBA should act with similar speed to deploy loans to clean energy small businesses
As Administrator, Isabel Guzman should expand the 504 Green Loan program, including expanding real estate lending for green small businesses. The SBA can also provide desperately needed capital for clean energy projects through the Small Business Investment Company.
Guzman’s leadership is critical to ensuring that Biden’s clean energy economy is a just economy. The SBA’s grant programs should focus on initiatives that bring America closer to energy democracy. 100% clean energy by 2035 means individuals and communities should have the opportunity to fully own and operate their energy assets. Guzman’s SBA can also end the shameful practice of disproportionately denying disaster loans to Black and Brown communities and ensure 40% of SBA’s green investments go towards disadvantaged communities.
In order to realize Biden’s climate mandate, every federal agency must become a climate agency. The Small Business Administration will be critical in this effort. Today, Evergreen Action is releasing 5 concrete actions that the next SBA must deliver in the all-out government mobilization to defeat the climate crisis:
1. Expand Green Lending for Small Businesses through the SBA 504 Loan Program
In 2020, the SBA demonstrated its ability to rapidly deploy capital, distributing over $400 billion through the Paycheck Protection Program (PPP). The SBA can similarly enable rapid deployment of capital on a national basis into clean energy and building retrofits. In particular, the SBA 504 Loan program provides long-term (up to 25 years) financing at low fixed rates to allow approved small businesses to acquire fixed assets for expansion or modernization, thereby promoting business growth, job creation, and economic development that strengthens the local tax base. The SBA 504 program funds approximately $5 billion in loans each year, made as a second mortgage on property through an existing network of over 260 community based non-profit Certified Development Corporations (or CDCs). The program typically guarantees 40% of project costs, increasing the private capital leverage of this program, working through local lenders and small business partners. The next SBA Administrator should ensure that all 504 Loan Program investments advance energy efficiency and on site renewable energy generation — the transition to a clean energy economy must include small businesses. Further, the dedicated SBA 504 “Green Loan Program” should make 504 loan funds available on improved terms for projects that commit to reduce energy use by 10%, generate at least 10% renewable energy on site, or achieve LEED certification. The ambitions of this program should be expanded to incentivize even greater clean energy use.
2. Use Small Business Investment Company (SBIC) Program Funding for Clean Energy Deployment in the Built Environment
The SBA Office of Investment and Innovation (OII) provides capital for high-growth American small businesses to develop and scale commercially viable innovations. Within that office, the Small Business Investment Company (SBIC) Program is a proven mechanism to provide urgently needed access to capital for small and local business growth. The SBIC represents a $4 billion annual authorization to fund equity investment into scaling smaller “growth stage” businesses. Over the 60-year life of the program, SBIC has deployed over $67 billion in capital into over 2100 SBIC funds, investing in more than 166,000 small businesses across a wide range of industries nationally. By investing into firms and at the project level, this approach has also been demonstrated as an effective tool for funding solar and energy efficiency projects, working directly through small and local businesses, to put new bricks and mortar on the ground and create jobs in clean energy projects. The next SBA Administrator should work to expand SBIC commitments to the clean energy sector as an emerging domestic market, and fully deploy SBIC resources behind an all-of-government mobilization for clean energy project development that jumpstarts new business incubation and accelerates local hiring.
3. Prioritize “Energy Democracy” Initiatives Through Local Clean Energy Ownership
As the United States transitions to a 100% clean energy economy, the federal government should prioritize economic development strategies that give individuals and communities the opportunity to fully own and operate their clean energy assets. The SBA should focus the efforts of its grant and loan programs, like 504 Loans, SBIC equity, and the Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programs, on small businesses that contribute to clean energy transformation through community-driven and community-owned projects. Further, it should support an equitable clean energy economy through small business local hiring. SBA should invest in staff capacity that interact and operate within local communities in every state working in coordination with other federal agencies as well as community leaders, tribal governments, non-profit organizations, and local and state government officials. The SBA can help place American entrepreneurs and small business owners — the lifeblood of the U.S. economy — at the center of clean energy job creation and the transformation of our nation’s energy and climate security.
4. Expand Equitable Disaster Loan Assistance for Small Businesses in the Face of Mounting Climate Threats
After a climate disaster, the SBA must be prepared to help small businesses access the necessary resources to recover. The SBA already provides low-interest and long-term loans to rebuild and recover from the physical and economic damage caused by declared disasters. However, with disaster relief loans for example have been deployed historically at a higher rate in neighborhoods that are disproportionately white than in communities of color. With expected increases in the severity and frequency of these disasters due to climate disruption, and with rising economic costs of disasters as economic growth and population centers have increased pushed into vulnerable areas to climate threats, the SBA Disaster Loan Programs can stand as a bulwark of sustainable reconstruction and a front line in the war on climate disruption. These programs include loan programs to support recovery of homes and personal property for individuals, as well as support for local small businesses to recover from physical disaster as well as economic injury. The next SBA Administrator must ensure that disaster relief is readily available for all American communities — and in particular for historically marginalized communities of color and low-income communities that are suffering greater cumulative impacts of environmental pollution, economic disinvestment, and climate change impacts, as identified through an Equity Mapping program.
5. Broaden Access and Opportunity for Small Businesses in Disadvantaged Communities as a Core Pillar of Clean Energy Reconstruction
For too long, low income populations and communities of color have disproportionately borne the burden of disinvestment and environmental injustice, without sharing in the opportunity of economic growth. President-elect Biden has prioritized clean energy job creation as a centerpiece of righting this historic wrong, first through a commitment that 40% of the benefits of investment in climate solutions be made to disadvantaged communities, as identified through an Equity Map. And the SBA is poised to lead. First, the next SBA Administrator should leverage all of its funding programs, in particular the 7(a) Loan Program and the Certified Development Company 504 Program, to meet this commitment and support clean energy businesses, as well as women- and minority-owned businesses, in disadvantaged communities. As a way to catalyze efficient investment, the SBA can offer fee waivers to these businesses and reduce other barriers to support. Further it should provide critical leadership within the wider federal network of financing and economic development agencies to promote coordinated investments that drive inclusion, especially in collaboration with the Departments of Commerce, Agriculture, and Housing and Urban Development, and in conjunction with the Community Development Financial Institutions (CDFI) Fund. SBA can also strengthen links to federal procurement from local women-, minority-, and veteran-owned businesses within its network of small and local businesses. Finally, the next SBA Administrator must ensure that programs are administered with a careful eye toward equity and inclusion — they must be charged with ensuring that every American small business, and every American community is fully engaged in the work of Building Back Better, to create good jobs in a just, equitable and climate-resilient economy.