Description
This lack of access to capital means fewer new businesses, fewer new jobs, a stagnating economy, and the stifling of innovative market solutions to social and environmental problems.
WHERE TO GET THE
GREEN:
Sources of Funds for Green
Entrepreneurs
GREEN FOR ALL CAP GREEN BUSINESS CONTENT
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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Bootstrapping Your Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Personal Network ($1,000 - $20,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Microloans ($500 - $100,000+) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Community Development Financial Institutions (CDFIs) . . . . . . . . . . . . . . . . . . . . . 9
Microenterprise Development Organizations (MDOs) . . . . . . . . . . . . . . . . . . . . . . 10
Peer-to-Peer Lending (up to $25,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
New Microlenders ($50,000 - $100,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Green Banks (up to $3 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Government-Backed Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The U.S. Small Business Administration Guaranteed Loan Programs. . . . . . . . . . 13
U.S. Department of Energy (DOE) Loan Guarantee program. . . . . . . . . . . . . . . . . 15
Federal Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Federal Small Business Innovation Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
State Renewable Energy and Energy-Effciency Grants, Tax Incentives,
and Rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Weatherization Assistance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Community and Economic Development Loans and Grants . . . . . . . . . . . . . . . . . . . . 17
Green Business Angel Investors and Venture Capital Funds. . . . . . . . . . . . . . . . . . . . . 19
Green or Clean Tech Angel Networks ($150,000 - $1.5 million) . . . . . . . . . . . . . . . 19
Venture Capital (VC) Organizations ($500k++) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SBA Small Business Investment Companies (SBICs) Program. . . . . . . . . . . . . . 20
SBA New Markets Venture Capital (NMVC) Program . . . . . . . . . . . . . . . . . . . . 21
Fellowships, Competitions and Foundation Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Additional Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
n
TABLE OF CONTENTS
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INTRODUCTION
First-time entrepreneurs typically face many challenges in securing fnancing for new
ventures. Because they are unproven in the marketplace, lenders view them as high-risk
borrowers. This has been especially true for entrepreneurs in low-income communities in
the U.S.
This lack of access to capital means fewer new businesses, fewer new jobs, a stagnating
economy, and the stifing of innovative market solutions to social and environmental
problems. The recession and credit crisis have compounded these problems, profoundly
impacting the capital markets and entrepreneurs.
On the one hand, the recession has increased demand for fnancing. Many people start
small businesses during economic downturns because they have lost their jobs, or they
see a new opportunity in the shifting marketplace. A recent study published by the
Kauffman Foundation found that more than half of the companies on the 2009 Fortune
500 list began during a recession.
1
On the other hand, the credit crisis has tightened the
supply of fnancing even as demand has increased. The crisis has led banks to sharply
reduce business loans
2
and credit card companies to reduce borrowing limits and increase
fees. All of this makes it more diffcult for entrepreneurs to secure start-up fnancing.
Conventional and emerging fnancial markets are changing rapidly. While big banks are
folding
3
or being bailed out by the U.S. government, a variety of new and alternative lend-
ers are beginning to provide fnancing to small businesses across the U.S. While micro-
lenders, such as Community Development Financial Institutions (CDFIs), already provid-
ed fnancing to underserved communities, they are now fnding that Middle America also
needs their services to help keep existing businesses afoat.
Part of this change is an unprecedented level of collaboration between public and private
entities in an effort to support small businesses. For example, Goldman Sachs recently
announced a $500 million initiative to support small businesses, and they are contributing
$300 million to support CDFIs in the U.S.
4
1. Kauffman Foundation report: http://www.kauffman.org/uploadedFiles/the-economic-future-just-happened.pdf
2. Retrieved from: http://www.nytimes.com/2008/07/28/business/economy/28credit.html on November 30, 2009.
3. http://www.fdic.gov/bank/individual/failed/banklist.html
4. Retrieved from: http://money.cnn.com/2009/11/17/smallbusiness/goldman_sachs_warren_buffet_small_business/ on Novem-
ber 20, 2009.
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The federal government is also making bold moves to support small businesses. For
example, the American Recovery and Reinvestment Act (ARRA) expands resources avail-
able to small businesses, and supports programs designed to increase business access to
capital and drive economic and community development. By putting funds in the hands
of state and local government agencies and institutions, ARRA also enables these entities
to increase the amount of loans and grants to small business owners in their region.
Although these efforts are promising, they cannot fully make up for the disastrous impact
the recession has had on investments in U.S. startups: a 71% reduction from January 2008
to January 2009.
5
Capital is limited and competition for it is ferce. This guide is intended
to provide some direction for green entrepreneurs, particularly those in underserved com-
munities, looking to navigate this treacherous terrain.
In today’s market, green entrepreneurs enjoy some advantages as they look to secure
fnancing (e.g., growing markets, increasing consumer demand, and the ability to leverage
government tax incentives in the clean energy economy). What is more, green banks and
CDFIs are sprouting up to serve the growing number of green entrepreneurs. Still, these
resources are insuffcient. As an entrepreneur, it is in your best interest to learn as much as
you can about emerging fnancial resources that are specifc to your industry, region, and
sector.
Prior to approaching lenders and investors, you should prepare a business plan that high-
lights the environmental, social and economic impacts of your business. You should also
prepare basic fnancial projections detailing the amount of funds you will need to launch
and scale your business, as well as your projected revenues. For more information on how
to prepare a green business plan, refer to The Green Business Plan Guide, another Green
For All publication.
6
This guide will help you understand the basic landscape of funds available to all small
businesses in the U.S. We have also included specifc programs and resources directed to-
ward green/clean energy entrepreneurs. Although relatively few fnancial resources and
services are targeted specifcally to green entrepreneurs, the number is growing quickly.
This guide also provides resources for those in low-income areas of the U.S. who do not
have adequate experience, credit, or collateral to secure conventional loans.
This document provides a general overview of the public and private sector funds and
5. Retrieved from: http://www.reuters.com/article/rbssRetailCatalogInternetOrder/idUSN0248706620090302 on November 30,
2009.
6. http://www.greenforall.org/CAP_resources/green-business-plan
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support services available to small businesses. It is by no means an exhaustive review.
Rather, it is a primer designed to prepare you for your own research. Once you have a
business plan and fnancial projections for your organization, we recommend that you in-
quire with local government and fnancial institutions about which programs and sources
of funding are best suited for your business.
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nBOOTSTRAPPING YOUR BUSINESS
“Bootstrapping” is the process of starting a business from scratch without outside fund-
ing or capital. A number of Fortune 500 companies, such as Microsoft and EBay, started by
bootstrapping.
7
In simple terms, a bootstrapped business is self-suffcient from inception
and grows incrementally as demand for its product or service increases. Bootstrapping
typically requires that the owners or partners invest a modest sum of money (often less
than $10,000) in order to launch the business. Although the ultimate goal may be to build
a large business offering diverse products or services, a bootstrapped business will focus
frst on something that generates immediate cash fow returns, with minimal cost inputs.
During a recession (when fnancing is hard to come by), bootstrapping is not only smart,
it is almost a requirement for success. Once a bootstrapped startup builds a loyal client
base and brand awareness, it is much easier to raise additional capital, such as loans,
grants, and venture investment. We recommend that while you research available fnanc-
ing for your business, you also think of ways to incorporate bootstrapping techniques into
your business model. This will likely increase your ability to secure additional fnancing.
To learn more about bootstrapping, visit http://venturebeat.com/2008/11/20/the-art-of-
the-bootstrap.
8
Advantages of bootstrapping:
Minimizes debt from large start-up loans •
Forces innovation and creativity by limiting access to funds •
Allows entrepreneurs to maintain ownership and control of their companies in- •
stead of ceding them to investors
Allows entrepreneurs to establish proof of concept, ideally with demonstrable cash •
fow
Allows entrepreneurs to exhibit business development and fnancial management •
skills, which will impress future investors and lenders (if needed)
nPERSONAL NETWORK ($1,000 - $20,000)
Entrepreneurs themselves fund more than 85% of startup businesses, often with the
fnancial support of friends and family.
9
Many entrepreneurs initially reach out to their
7. Retrieved from: http://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/ on November 29, 2009
8. Additional articles on bootstrapping:
http://biz?nance.about.com/od/cashmanagement/ht/Bootstrapping_Your_Startup_Business.htm;
http://www.entrepreneur.com/magazine/entrepreneursstartupsmagazine/2002/october/55776.html
http://www.seattle20.com/blog/Bootstrapping-stories-Financing-Your-Startup-Through-Consulting.aspx
9. Retrieved from: http://smallbusiness.dnb.com/business-?nance/business-loans/10932-1.html on November 29, 2009
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personal and professional networks for debt or equity investments.
10
By raising startup
capital from people who already know and trust you frst, you give yourself time to fur-
ther develop your business plan and fnancial projections before approaching strangers
for funds. Raising even a modest sum can help you begin to purchase supplies, market
your product, make capital investments, build a website, avoid credit card debt, and even
hire someone for technical assistance. Raising money from your personal network can
also prepare you for your eventual presentation to lenders and investors.
11
Tips for raising funds from your personal network:
Be prepared. • While you may know these people, you can increase your chances of
raising funds if you have a business plan, including the environmental, social and
economic impacts of your enterprise.
Know what you’re asking for. • Before you ask for money, decide whether you are
asking for donations, personal loans (which you will repay), or investments (in
exchange for partial ownership of your business). You will need to clearly commu-
nicate to your audience the type of fnancing you are requesting.
Launch an e-mail fundraising campaign. • If you are planning to start a non-proft
organization or a for-proft social enterprise that aims to address a critical social or
environmental issue, you may be able to raise seed donations via an e-mail fund-
raising campaign. Try sending an e-mail to all of your trusted personal contacts
to ask for modest seed donations ($20-$100). If you do this, be sure to include a
brief overview of your proposal, as well as a way for them to donate (e.g., a PayPal
link).
Utilize social media outlets. • You can use Facebook and Twitter to spread the word
about your proposal, provided you don’t give away so much information that you
jeopardize your plans. The Facebook Causes application is a great way to raise
seed donations from your personal online network.
12
Ask for introductions. • The best way to utilize your personal network is to ask
friends and family members if they know anyone who would be interested in
loaning you money or investing in your business. Your goal should be to fnd
individuals who have a personal or professional interest in seeing your business
succeed.
10. Debt ?nancing refers to money that you borrow from lending institutions, friends and family, etc. This money has to be repaid
over time. Equity ?nancing involves selling a portion of your business to investors in exchange for money to launch or grow your
business. Depending on the type of organization you are launching, you may also be able to raise funds via donations and grants,
which do not need to be repaid.
11. For additional information on writing a business plan, refer to the Green For All publication, “The Green Business Plan Guide.”
http://www.greenforall.org/CAP_resources/green-business-plan
12. For more information about Facebook Causes: http://apps.facebook.com/causes/about
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Take legal precautions. • Protect yourself, your business, and your personal rela-
tionships by consulting with lawyers and getting agreements in writing when you
accept loans or investments (even from friends and family members).
nMICROLOANS ($500 - $100,000+)
Micro Finance Institutions (MFIs) provide fnancing and additional support to borrowers
who cannot access capital from traditional lending institutions like banks. MFIs specialize
in lending small amounts of money to small companies or entrepreneurs in need. MFIs
and other microlending organizations differ substantially from one another, and many
focus on specifc target populations. Microlenders can be private, public, for-proft or non-
proft institutions. They are typically community-based non-profts funded by a mix of
Small Business Administration (SBA) funds, community development funds, philanthro-
pists, and foundations.
Microlending is targeted toward “microenterprises,” or businesses requiring less than
$35,000 startup capital and with fve or fewer employees.
13
Due to the current scarcity of
bank loans and shrinking credit card limits, many established business owners are also
approaching microlenders for gap fnancing and working capital loans. Since 2008, micro-
lenders across the U.S. have reported a nearly 50% increase in demand for loans. They are
pressuring the government to provide additional funds so they can meet this need.
14
The
average microloan is $13,000, typically payable over six years with interest rates ranging
between eight and thirteen percent.
15
While interest rates for microloans can be higher than for standard loans, they are often
easier to obtain. Eligibility differs depending on the lending organization, but the borrow-
er typically needs to have a credit score of at least 575, no recent bankruptcies, an ability to
personally guarantee the loan (or a cosigner), and demonstrably suffcient income to cover
payments. Startup companies are often given special considerations, but in this lending
environment, you should not expect too much leniency.
Some advantages of microloans:
Many have specifc social and need-based lending criteria. •
Some are focused on social entrepreneurs who plan to address environmental, •
social and/or economic development problems within their communities.
They may have more fexible credit standards. •
Loans can be personally guaranteed. •
13. Retrieved from AEO website: http://www.microenterpriseworks.org on November 30, 2009
14. Retrieved from: http://www.microenterpriseworks.org/index.asp?bid=4139 on November 30, 2009.
15. Retrieved from: http://www.sba.gov/smallbusinessplanner/start/?nancestartup/SERV_LT_MICRO.html on March 24, 2010.
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Below, we go into a little more detail about two common microlending models in the
U.S.: Community Development Financial Institutions (CDFIs) and Microenterprise
Development Organizations (MDOs)
Community Development Financial Institutions (CDFIs)
CDFIs are community development banks, credit unions, loan funds and venture funds
that provide fnancial services, loans, education and business support to small busi-
nesses, oftentimes in underserved communities. More than 1000 CDFIs in the U.S. help
individuals with little or no banking experience open bank accounts, learn about fscal
responsibility, and borrow money to start businesses.
16
With the recession making it dif-
fcult or impossible for small businesses to secure loans from conventional banks, demand
for fnancing through CDFIs has grown signifcantly since 2008. ARRA has alleviated
this somewhat, allocating an additional $100 million in funds to the CDFI Program in
February 2009.
17
Right now, not many CDFIs focus on helping green entrepreneurs. We expect this to
change quickly due to the emergence of green businesses, as well as CDFIs’ advanta-
geous position for leveraging their expertise to help local green businesses.
18
Some “green
banks,” such as Shoreline Pacifc, are also CDFI-certifed institutions (see Section V of this
guide, Green Banks).
Examples of CDFIs operating in the U.S.:
Seedco Financial Services •
19
(loans up to $200,000)
A CDFI committed to supporting community development through investing in
low-income communities
ACCION USA •
20
($500 - $50,000)
One of the largest microlending institutions in the U.S. serving low- to moderate-
income communities
Non-Proft Finance Fund •
21
(typically $100,000 - $2 million)
A CDFI that provides loans to non-profts that have been in existence for at least
three years and have an annual operating revenue of at least $500,000
Georgia Green Loans •
22
($500 - $35,000)
A green CDFI offering microloans to green entrepreneurs
16. Retrieved from: http://www.cd?.org/ on November 30, 2009.
17. Retrieved from: http://www.cd?fund.gov/recovery/ on March 24, 2010.
18. For more information on the potential for green CDFIs: http://www.nextamericanopportunity.org/ce/bgg/
19. http://www.seedco.org/
20. http://www.accionusa.org
21. http://www.nonpro?t?nancefund.org/
22. http://www.georgiagreenloans.org/
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For more information about CDFIs, please visit one of the following sites:
Federal Government CDFI Fund: http://www.cdffund.gov/ •
CDFI Coalition: http://cdf.org •
To fnd a CDFI near you: http://cdf.org/index.php?page=info-4 •
Microenterprise Development Organizations (MDOs)
Some MDOs are CDFI-certifed and can provide loans with favorable terms. But MDOs
are perhaps better known for their efforts to build the capacity of microenterprises by
teaching critical business and fnancial skills.
For more information about MDOs:
FIELD’s Online Microenterprise Program Directory • lists programs offering
microloans, technical business support and other services to microenterprises.
(http://feldus.org/Publications/Directory.asp).
The Association for Enterprise Opportunity (AEO) Membership Directory • lists
microenterprise development resources by state. (http://www.microenterprise-
works.org/index.asp?bid=282).
Peer-to-Peer Lending (up to $25,000)
The online success of Kiva.org popularized “Peer-to-Peer” lending. Kiva.org empowers
individuals to lend to unique entrepreneurs around the globe. These microloans (often
as small as $25) help alleviate poverty overseas while providing a rewarding experience
for lenders, who can select the individual or group to receive their loans. Recently, Kiva
announced that it would begin providing Peer-to-Peer loan services for U.S.-based entre-
preneurs as well.
23
Kiva is not the only organization providing this type of lending service
in this country; a number of other Peer-to-Peer companies are emerging. Kiva is at one
end of the spectrum, where the microlender is more interested in social change than the
fnancial return, which may be as low as 0%. At the other end, companies like Prosper and
Lending Club are enticing people to invest in a microlending model with an eye towards
more signifcant fnancial returns. Some of these emerging companies are facing challeng-
es with the U.S. Securities and Exchange Commission (SEC), so availability of loans from
these sources may vary.
23. Retrieved from: http://www.techcrunch.com/2009/06/10/kiva-brings-microlending-home-to-us-entrepreneurs-in-need/ on
November 30, 2009
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Examples of Peer-to-Peer lending organizations in the U.S.:
Kiva •
24
Prosper •
25
Lending Club •
26
Loanio •
27
New Microlenders ($50,000 - $100,000)
The credit crisis is currently driving innovation in lending markets. Entrepreneurs are
struggling to pay their bills and keep their doors open, creating an opportunity for new
fnanciers to step in and offer small loans—sometimes at steep interest rates.
28
We expect
to see more of these innovative microlenders forming in the future to meet the growing
demand for working capital and startup loans.
Examples of New Microlending institutions in the U.S.:
Grameen America: • http://www.grameenamerica.com/
In 2007, Grameen America, a non-proft, launched a pilot offce in New York to
bring the model of microfnancing popularized overseas to the U.S. Muhammad
Yunus, who won the Nobel Peace Prize for his microcredit efforts in Bangladesh, is
spearheading this effort in the U.S.
On Deck Capital: • http://www.ondeckcapital.com
On Deck Capital is a private lender specializing in loans for small businesses that
banks or conventional lenders might consider too risky. On Deck Capital recently
announced a partnership with the Urban League to offer loans for small business-
es through Urban League affliates.
29
nGREEN BANKS (UP TO $3 MILLION)
In the wake of the credit crisis, a handful of new, emerging banks are aiming directly at
supporting green entrepreneurs.
30
These “green banks” provide traditional banking ser-
vices with a green twist. They offer personal and business checking and saving accounts,
as well as loans and other fnancial services. What sets these banks apart from more con-
ventional banks is that they are founded on “triple bottom line” guiding principles—both
24. http://www.kiva.org
25. http://www.prosper.com
26. http://www.lendingclub.com
27. http://www.loanio.com
28. Retrieved from: http://online.wsj.com/article/SB122347723865615409.html on December 2, 2009
29. Retrieved from: http://www.startribune.com/business/70347757.html on November 30, 2009.
30. Retrieved from: http://archives.chicagotribune.com/2009/jun/16/business/chi-tue-green-banking-jun16 November 30, 2009
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internally and via their lending activities. For example, when underwriting a loan, a green
bank may take into account the sustainability, energy-effciency, or social equity impacts
of the loan applicant. Green banks also offer products like loans for renewable-energy in-
stallations or green building activities. In general, their lending policies favor individuals
and businesses that have a positive impact on the environment and their local community.
Green banking is just taking shape. Even in the midst of this recession, the idea seems to
have power. Even as the recession was beginning in early 2008, First Green Bank exceeded
its fundraising goals.
31
Examples of green banks in the U.S. that are already open, or plan to open in 2010:
ShoreBank Pacifc •
32
—Ilwaco, Washington (FDIC member)
Sustainable bank focusing on “triple bottom line” business philosophies for them-
selves and their customers. Support and fnancial services available for for-proft
and non-proft businesses. Shorebank is also a certifed CDFI.
New Resource Bank •
33
—San Francisco, California (FDIC member)
A community bank focusing on effciency, sustainability and community building.
New Resource Bank offers specifc loans and certifcates of deposit (CDs) for solar
installations.
First Green Bank •
34
—Florida (FDIC member)
Promotes environmental and social responsibility.
Green Bank •
35
—Texas (FDIC member)
Committed to environmentally and socially responsible practices.
e3bank •
36
—Malvern, Pennsylvania (Opening in 2010)
e3bank will be a B Corporation,
37
and will be committed to building sustainable
communities and businesses, protecting the environment, and promoting social
equity.
GreenChoice Bank •
38
—Chicago, Illinois (Opening in 2010)
A local, community bank with a sustainable mission, LEED-certifed branch con-
struction, and operational and lending policies that support sustainable practices.
31. Retrieved from: http://www.nytimes.com/gwire/2009/04/06/06greenwire-green-banks-sprout-from-ruins-of-economic-
cris-10437.html November 30, 2009.
32. http://www.eco-bank.com/
33. http://www.newresourcebank.com
34. http://www.?rstgreenbank.com/
35. http://www.greenbank.com
36. http://www.e3bank.com/contact
37. For more information on B corporations: http://www.bcorporation.net/
38. http://www.greenchoicebank.com
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nGOVERNMENT-BACKED LOANS
When the government backs a loan, it promises to repay a major proportion of the debt
should the borrower default to the bank. Government-backed loans are designed to
increase loans made to start-up and small businesses, which lending institutions would
otherwise deem too risky.
The U.S. Small Business Administration Guaranteed Loan Programs
The Small Business Administration (SBA) is a federal agency responsible for assisting
small businesses. Depending on the industry you are in, where you are located, and what
stage you are in forming your business, the SBA offers a variety of technical, fnancial, and
contracting support services designed to help you succeed. This guide focuses only on se-
lect fnancial services offered by the SBA. For additional information regarding SBA loans
and free technical assistance, please visit http://www.sba.gov/aboutsba/sbaprograms/
index.html.
The SBA does not make loans directly to businesses, but rather guarantees the loans that
banks and other lending institutions make to small businesses. The SBA also has two
little-publicized environmental loan programs: the Energy Conservation Loan Program
and the Pollution Control Loan Program. To inquire about the availability of SBA loans in
your area, contact local banks and ask to speak with a loan offcer regarding SBA loans.
Examples of SBA loan-guarantee programs available to American businesses:
39
Energy Conservation Loa • n
40
This loan is for small businesses that design, manufacture, distribute or install
devices that conserve energy. These loans are not for the end user of the product.
End-user businesses needing a loan to install renewable energy devices can apply
for a 7(a) loan.
Pollution Control Loan Program •
41
This loan provides fnancing for small businesses to install pollution-control facili-
ties (including recycling).
7(a) Loan Program • (maximum is currently $2 million, but this cap may soon in-
crease to $5 million)
42
This is the most common and fexible loan program for start-up or existing small
businesses. Most U.S. banks participate in this program, and borrowers can use
39. Quick reference guide to SBA Loans:
http://www.sba.gov/idc/groups/public/documents/wv_clarksburg/wv_sbaquickreferenceguide.pdf
40. For additional information about the Energy Conservation Loan Program:
http://www.energystar.gov/index.cfm?c=sb_state.sba_loans
41. For additional information about the Pollution Control Loan Program:
http://www.energystar.gov/index.cfm?c=sb_state.sba_loans
42. For additional information about the SBA 7(a) Loan Program:
http://www.sba.gov/?nancialassistance/borrowers/guaranteed/7alp/FINANCIAL_GLP_7A_TERMS.html
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these funds for a variety of purposes such as start-up or working capital needs,
equipment purchases, renovations, property acquisition, or debt restructuring.
43
The terms of 7(a) loans are negotiated on a case-by-case basis, but they are typical-
ly structured as long-term loans with favorable interest rates. Eligibility is restrict-
ed to for-proft businesses that meet SBA small business size standards.
44
7(a) Express Loans • (up to $350,000)
These loans have streamlined application and review procedures, and offer a 36-
hour response turnaround.
45
Community Express • loans are specifcally for borrowers in underserved
and distressed communities, such as the SBA’s Historically Underutilized
Business Zones (HUBZones).
46
Patriot Express • loans are designed for businesses owned and controlled by
veterans (minimum 51% ownership).
7(a) Small/Rural Lender Advantage Loans • (S/RLA) (up to $350,000)
The SBA initiated the S/RLA program in 2008 to promote lending in small, vulner-
able communities facing high unemployment, population loss, etc.
47
The program
streamlines the application process with a one-page application and a 3-5 day
processing turnaround.
Certifed Development Company Loan Program • (CDC/504) (up to $2 million)
The CDC/504 loan program is designed for purchasing fxed assets, such as
equipment or property, as well as for fnancing construction or renovations. The
program allows borrowers to purchase real estate with low down payments,
long-term fnancing, and competitive interest rates. These loans cannot be used
for start-up funds or working capital. The SBA recently changed its rules to allow
borrowers to refnance existing fxed-asset loans as part of a 504 expansion loan
(as long as the refnancing portion is less than 50% of the total expansion cost).
48
Eligibility is restricted to for-proft businesses that meet SBA small business size
standards.
Microloan Program • (increased from $35,000 to $50,000 maximum in 2009)
49
Microloans are short-term loans for startup or expansion. They can be used for
working capital, inventory and equipment purchases. These loans cannot be used
43. For additional information on 7(a) loans: http://www.sba.gov/?nancialassistance/borrowers/guaranteed/7alp/index.html
44. SBA Size standards: http://www.sba.gov/contractingopportunities/of?cials/size/index.html
45. For more information on 7(a) Express loans: http://www.sba.gov/?nancialassistance/borrowers/guaranteed/7alp/FINANCIAL_
GLP_7ALP_EXPRESS.html
46. http://www.sba.gov/hubzone/
47. For more information about the S/RLA program: http://www.sba.gov/rurallenderadvantage/
48. Retrieved from: http://online.wsj.com/article/SB124588146947550063.html on November 29, 2009.
49. Retrieved from: http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=200910210065
30&newsLang=en on November 30, 2009.
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to pay debt or purchase real estate.
50
These loans are administered through mi-
crolending institutions (see previous section). To fnd microloan partners listed
by state, please see http://www.sba.gov/idc/groups/public/documents/
sba_homepage/serv_microloan_intermediary.pdf. Eligibility is restricted to for-
proft businesses that meet SBA small business size standards, as well as non-proft
childcare centers.
America’s Recovery Capital (ARC) Loan • (up to $35,000)
The ARC loan is a temporary program that the SBA is offering to existing small
businesses experiencing fnancial hardship. The loans are interest-free and 100%
backed by the SBA.
51
They are designed to help businesses make principle and
interest payments on other existing loans so that they can free up funds for build-
ing their business and saving jobs. The ARC program is part of ARRA, and loans
are available from SBA commercial lenders until the money runs out, or September
30, 2010, whichever comes frst. Eligibility is restricted to existing for-proft small
businesses that were proftable in the past but are currently experiencing fnancial
hardship, and that have qualifying small business loans.
U.S. Department of Energy (DOE) Loan Guarantee program
The DOE Loan Guarantee Program is intended for projects that “avoid, reduce, or seques-
ter air pollutants or anthropogenic emissions of greenhouse gases” and “employ new or
signifcantly improved technologies as compared to technologies in service in the United
States at the time the guarantee is issued.”
52
These loans are typically very large—in the
multimillion-dollar range for large-scale projects. For example, Solyndra (a solar manufac-
turing company) was awarded a $535 million dollar loan guarantee in March 2009.
53
Its lengthy and costly application process has led to mixed reviews for this program from
the private sector.
54
In October 2009, the DOE announced a new Financial Institution
Partnership Program (FIPP) designed to leverage public and private partnerships to expe-
dite the Loan Guarantee Program.
55
To apply for a loan guarantee, you must search for a solicitation on this website: http://
www.lgprogram.energy.gov/keydocs.html
50. http://www.sba.gov/?nancialassistance/borrowers/guaranteed/mlp/index.html
51. http://www.sba.gov/recovery/arcloanprogram/REC_WHATISARCLOAN.html
52. Retrieved from: http://www.lgprogram.energy.gov/features.html On November 28, 2009
53. Retrieved from: http://cleantech.com/news/4286/solyndra-nabs-535m-doe-loan-500-mw on November 25, 2009.
54. Retrieved from: http://www.greentechmedia.com/articles/read/doe-loan-guarantee-is-it-a-good-deal/ on November 30, 2009.
55. Retrieved from: http://www.lgprogram.energy.gov/press/100709.pdf on November 28, 2009.
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nFEDERAL GRANTS
A handful of federal grants are available to businesses involved in energy effciency and
technology innovation. Each program has different guidelines and requirements. In many
cases, grantees do not need to repay the awarding agency. Finding and applying for these
grants can be confusing for entrepreneurs who have not previously dealt with the federal
government. If you plan to apply for one of these grants, prepare to be persistent and pa-
tient with the required forms and the online registrations necessary to access information.
Federal Small Business Innovation Grants
Two federal programs provide highly competitive grants to startups and small businesses
engaged in research and development (R&D) and technological innovation. The Small
Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
programs administer grants through 11 different federal agencies. If you are engaged in
scientifc R&D, or you are working on a new technology that has commercial appeal, you
may want to explore these grant programs in more detail by visiting http://www.busi-
ness.gov/expand/green-business/product-development/innovation.html.
Select agencies offering SBIR/STTR grants that may appeal to green entrepreneurs:
Department of Agriculture (USDA) •
Department of Energy (DOE) •
Department of Health and Human Services •
Environmental Protection Agency (EPA) •
National Oceanic and Atmospheric Administration (NOAA) •
National Science Foundation •
For additional information on government loans, grants, bonds and tax incentives for
small businesses, visit: http://www.business.gov/fnance/fnancing/
nSTATE RENEWABLE-ENERGY AND ENERGY-EFFICIENCY GRANTS,
TAX INCENTIVES, AND REBATES
A number of federal, state and local incentives and policies across the U.S. promote en-
ergy effciency and the use of renewable-energy technologies. Unfortunately, given the
wide variety of policies across the country, this guide cannot provide a comprehensive or
exhaustive review of them all. Instead, we recommend you research available tax incen-
tives and rebates available in your state that apply to your specifc business.
For comprehensive information on energy-effciency and renewable-energy incentive pro-
grams in your state, please reference one of these three sites:
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http://www.dsireusa.org/ •
http://www.energystar.gov/index.cfm?c=sb_join.sb_fnanceproducts •
http://www.energystar.gov/index.cfm?c=tax_credits.tx_index •
Weatherization Assistance Program
The U.S. DOE Weatherization Assistance Program (WAP) provides funding through state
agencies to help low-income individuals and families reduce energy costs.
56
Under WAP,
state or federal funds may also be available for companies that create new jobs or offer
job training to conduct energy-effciency upgrades. Contact your state energy agency to
inquire about available funds and programs.
57
nCOMMUNITY AND ECONOMIC DEVELOPMENT LOANS AND GRANTS
A number of new and existing federal programs are designed to promote energy conser-
vation, the use of renewable energy, economic and community development, green job
growth, and small business development. For example, ARRA provided new funds to
state agencies for green-job training
58
and the Energy Effciency and Conservation Block
Grant (EECBG) Program.
59
Most federal funds allocated through ARRA and other poli-
cies are awarded to state and local government agencies and tribes, which in turn distrib-
ute these funds to individuals and businesses on a case-by-case basis. Loans and grants
distributed by state and local agencies often have low interest rates and deferred payment
plans designed to help startup businesses succeed and help small business achieve scale.
In order to receive these funds, you must apply and compete with other business owners
and entrepreneurs. It is critical for you to understand the specifc goals of the programs
for which you are applying. In your business plan and application, be sure to clearly state
the positive environmental and community development impacts of your business. Also
highlight the number of green jobs you will be creating in your area.
Once you have a business plan, you should contact your local city or county development
offce, or one of the agencies listed below, to inquire about loans and grants for which you
may apply.
56. For more information about the WAP, please go to: http://apps1.eere.energy.gov/weatherization/apply.cfm and also refer to
the Green For All guide “Understanding the Weatherization Assistance Program”: http://www.greenforall.org/resources/reports-
research/wap. A helpful fact sheet can also be found here: http://apps1.eere.energy.gov/weatherization/pdfs/wx_recovery_fact_
sheet.pdf
57. For a list of state WAP contacts, go to: http://apps1.eere.energy.gov/weatherization/state_contacts.cfm
58. Green For All Guide “Understanding the Competitive Grants for Green Jobs Training”: http://www.greenforall.org/resources/
reports-research/understanding-the-competitive-grants-for-green-jobs-training
59. http://www.eecbg.energy.gov/
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Here is a list of some helpful places to start:
City/County Development offce •
If your city does not have a specifc development offce, ask for the staff member in
your city government who handles community development issues.
Examples:
http://www.lacdc.org/CDCWebsite/home.aspx
http://oaklandnet.com/government/ceda/
City/County Redevelopment Agencies •
Redevelopment areas are specially created districts within blighted communi-
ties, where local property taxes are collected for a dedicated redevelopment fund.
These funds are then used to encourage economic development in these areas
through fnancial and technical support to small businesses.
Examples:
http://www.hudsonedc.org/
http://www.thejcra.org/
http://www.crala.org/
State Redevelopment Associations •
Example:
http://www.calredevelop.org
State or county Workforce Investment Boards (WIBs) •
These entities typically receive green-job training funds
Example:
http://www.cwib.ca.gov/
National Community Development Association •
Example:
http://www.ncdaonline.org/
Below is a brief summary of the Community Development Block Grant programs, one
other major source of economic development funds at the state and local level. These
funds will be available to you through your state, city or county government offces.
Community Development Block Grant (CDBG) Program
CDBG is a program of the federal Housing and Urban Development Department (HUD).
Based on the size of their low- and moderate-income populations, CDBG provides state
and local governments with fnancial resources to stabilize local communities and provide
local jobs. When applying for these grants, it is critical to demonstrate the impact your
business will have on the local economy. You will be required to estimate the number of
full-time equivalent (FTE) jobs your business will create. For more information on CDBG,
please see this site: http://portal.hud.gov/portal/page/portal/RECOVERY/programs/
COMMUNITY
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nGREEN BUSINESS ANGEL INVESTORS AND VENTURE CAPITAL FUNDS
Many startup and early-stage companies with unproven ideas and technologies do not
have access to suffcient credit to launch their businesses. These entrepreneurs often turn
to angel investors (angels) or venture capital (VC) frms for funding. Angels and VCs
provide both debt (loans) and equity fnancing (investment in exchange for part owner-
ship of your business). Angel investors and VCs are focusing on the green business and
clean technology (clean tech) sectors in numerous ways. If your business plan has been
well received and you are confdent about your organization’s chances for success, you
may want to consider approaching angels or VCs that focus on your industry. Each deal
is structured differently; some investors may want a say in how you run your business
(e.g., a seat on the board), whereas others may simply provide fnancing in exchange for
prospective returns (“silent investor”). You should consult a lawyer prior to signing any
agreements with investors.
Green or Clean Tech Angel Networks ($150,000 - $1.5 million)
Angel investors are individual investors, or groups of investors that invest in early-stage
startup companies. Angels typically provide “bridge” fnancing to companies after the
self-funding or bootstrapping stage, and prior to VC funding.
60
Some also provide seed
capital. Angel investment terms tend to be more fexible than VC investment terms.
Examples of Green/Clean Tech Angel Investors:
Investors Circle •
61
A nonproft network comprised of angel investors, professional venture capital-
ists, foundations, family offces, and others who use private capital to promote the
transition to a sustainable economy.
The Cleantech Angel Network of Networks •
62
A network of leading clean technology angel investors created to exchange deal
fow information, improve clean tech education, and connect clean tech entrepre-
neurs with early-stage investors.
EcoElectron Ventures •
63
A seed-stage capital investment fund focusing solely on clean-energy companies
located in Southern California. They provide strategic planning, business manage-
ment, and equity to startup and early-stage companies.
60. For additional information on Angel Investments: http://www.smallbusinessnotes.com/?nancing/angelinvestors.html
61. http://www.investorscircle.net/
62. http://www.cleantechangels.org
63. http://www.ecoelectron.com/
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Venture Capital (VC) Organizations ($500k++)
Unlike angel investors who invest in startup companies, VCs typically fund established
companies as they look to expand. VCs generally invest signifcantly larger sums of
money, albeit in fewer companies, than their angel counterparts. For example, in 2006, VC
companies in the U.S. invested in 2,900 frms with an average investment of $8.9 million,
whereas angels invested in 51,000 businesses with an average investment of $500,000.
64
While there are a large number of VC frms in the U.S., many of them have very distinct
focal areas. Only a very small portion of these frms considers investments in companies
with an environmental and a social mission. That said, the federal government is also
partnering with private VC frms to stimulate economic growth and to help some of these
small businesses achieve scale.
For more information about Green VC funds or community development venture funds,
see the following:
SJF Ventures •
65
SJF Ventures is a venture capital partnership. Through its investment funds, the
frm provides equity fnancings from $500K to $5MM, solo or in syndicates, to
companies seeking expansion capital. SJF looks to partner with entrepreneurs who
are committed to impacting the world positively through their businesses.
Greenvc.org •
66
Provides resources and information for green entrepreneurs.
Community Development Venture Capital Alliance (CDVCA) •
A network of community development venture capital investors who invest in
businesses in economically distressed areas in the U.S. and abroad.
67
Investments
are made in companies at different stages of development, from startup to ex-
pansion. For a list of CDVCA Member funds offering fnancing, see this website:
http://www.cdvca.org/index.php?option=com_content&view=category&id=42&
Itemid=66
Examples of public/private VC partnerships currently active in the U.S.:
SBA Small Business Investment Companies (SBICs) Program
Licensed by the SBA,
68
Small Business Investment Companies (SBICs) are privately owned
venture funds that offer equity fnancing for small businesses. The SBA also offers an ad-
ditional designation for “Specialized Small Business Investment Companies” (SSBICs),
which solely fund small businesses owned by socially or economically disadvantaged
64. Retrieved from: http://www.nsf.gov/statistics/seind08/c6/c6s8.htm on December 2, 2009.
65. http://www.sjfund.com/
66. For the Green VC list of green and social VC ?rms: http://www.greenvc.org/green-and-social-venture-capital.html
67. For additional information: http://www.cdvca.org/
68. http://www.sba.gov/?nancialassistance/borrowers/vc/sbainvp/index.html
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persons. SBICs are government and private-sector partnerships aimed at funding small
businesses in the U.S. The SBA provides funds to SBICs, and in turn SBICs invest in small
businesses. Eligibility is restricted to small businesses with a net worth under $18 million.
To fnd SBICs near you, visit http://www.sba.gov/aboutsba/sbaprograms/inv/locals-
bic/index.html
SBA New Markets Venture Capital (NMVC) Program
The NMVC program is similar to the SSBIC program. NMVC companies are privately
owned and managed funds, licensed by the SBA, that make equity investments in small
businesses in distressed communities. Eligibility is restricted to Smaller Enterprises (net
worth less than $6 million) in “Low-Income Geographic Areas.”
69
For a list of NMVC
funds, visit http://www.sba.gov/aboutsba/sbaprograms/inv/nmvc/INV_NMVC_
COMPANIES.html?cm_sp=ExternalLink-_-Federal-_-SBA.
Additional resources for angel and VC frms in the U.S.:
List of Venture Capital Organizations in each region of the U.S • .
http://www.nvca.org/index.php?option=com_content&view=article&id=106&Ite
mid=134#regional
Energy Venture Capital and Angel Investors List •
A list of frms investing in energy companies and clean tech companies.
http://energypriorities.com/entries/2005/11/energy_venture.php
The Funded.com •
An online community of entrepreneurs that researches, rates, and reviews funding
sources worldwide.
http://www.thefunded.com
nFELLOWSHIPS, COMPETITIONS AND FOUNDATION AWARDS
A handful of U.S. foundations offer highly competitive fellowships and grants for entre-
preneurs with proposals or existing businesses that address critical social or environmen-
tal issues in the U.S. and abroad. If your proposal or organization has received a lot of
attention and has been endorsed by well-known entities, we strongly encourage you to
consider applying for one of the fellowships or awards listed below. Please be aware that
the application process can be challenging and lengthy, so we recommend that you apply
only if you suspect you have a good chance of winning. (Please also keep in mind that
there are typically application fees.)
69. For additional NMVCC eligibility information: http://www.sba.gov/aboutsba/sbaprograms/inv/nmvc/INV_NMVC_PROGOV-
ERVIEW.html
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Examples of awards and competitions:
The Skoll Awards for Social Entrepreneurship •
70
These are extremely competitive three-year grants ($765,000 each) for social entre-
preneurs tackling critical issues in the areas of health, economic and social equity,
peace and security, institutional responsibility, and environmental sustainabil-
ity. Out of hundreds of applicants each year, only a handful are awarded grants.
Eligibility is restricted to non-proft and for-proft organizations with a successful
track record (minimum of three years in operation).
Echoing Green Fellowship •
71
Provides seed funding ($60,000-$90,000) for 12-15 fellows per year. Eligibility is
restricted to non-proft and for-proft startup social enterprises.
Cleantech Open •
72
A business plan competition for clean tech companies that promote environmental
sustainability. Eligibility is restricted to startup companies, comprised of at least
two individuals, with less than $500,000 of outside funding.
Clean Tech Open Grants Program •
73
A trial program that includes access to funds, workshops and training, and sup-
port with federal contract bids. Eligibility is restricted to companies already ship-
ping a product, or very close to doing so.
Draper Richards Foundation •
74
Funds select social entrepreneurs for three years, providing $100,000 per year.
Eligibility is restricted to non-proft startups.
The Energy Foundatio • n
75
Makes grants to non-profts that aim to increase energy effciency and promote the
use of renewable energy in the U.S. and China. Eligibility is restricted to non-prof-
its with regional impact.
Green VC’s Resources for Business Plan Competitions and Awards •
http://www.greenvc.org/business-plan-competitions.html
http://www.greenvc.org/fellowships-awards.html
70. http://www.skollfoundation.org/skollawards/index.asp
71. http://www.echoinggreen.org/fellowship
72. http://www.cleantechopen.com
73. http://www.cleantechopen.com/app.cgi/content/programs/grants
74. http://www.draperrichards.org/
75. http://www.ef.org
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CONCLUSION
As the variety of resources listed in this document shows, a large number of public and
private programs are designed to support small businesses seeking fnancing. Both the
public and private sector recognize that green entrepreneurs are capable of catalyzing an
economic recovery that protects the environment and is inclusive of all citizens. Together,
hard-working, innovative entrepreneurs and collaborative public and private partner-
ships are creating a historic opportunity to repair the damaging effects of social and envi-
ronmental inequalities in the U.S.
n
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ADDITIONAL
RESOURCES
Green For All Publications
The American Recovery and Reinvestment Act: A Guide for Small Businesses and
Nonprofts
http://www.greenforall.org/what-we-do/capital-access-program/business-guide-to-the-
recovery
Bringing Home the Green Recovery: A User’s Guide
http://www.greenforall.org/resources/recoveryusersguide
Minority Business Development Agency (MBDA) (U.S. Department of Commerce)
A Federal agency created specifcally to foster the establishment and growth of minority-
owned businesses in America.
MBDA fnancing resources: http://www.mbda.gov/?section_id=3
MBDA Capital Locator (coming soon):
http://www.mbda.gov/index.cfm?fuseaction=crl.main
Community Investing Center resources
http://www.communityinvest.org/resources/add.cfm
Others:
Seedco small business recovery report Crisis on Main Street:
http://www.seedco.org/documents/publications/Seedco_Small_Business_Recovery.pdf
Startup Fundraising 101 presentation:
http://entrepreneur.venturebeat.com/2009/07/08/startup-fundraising-101/
n
doc_876563951.pdf
This lack of access to capital means fewer new businesses, fewer new jobs, a stagnating economy, and the stifling of innovative market solutions to social and environmental problems.
WHERE TO GET THE
GREEN:
Sources of Funds for Green
Entrepreneurs
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Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Bootstrapping Your Business. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Personal Network ($1,000 - $20,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Microloans ($500 - $100,000+) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Community Development Financial Institutions (CDFIs) . . . . . . . . . . . . . . . . . . . . . 9
Microenterprise Development Organizations (MDOs) . . . . . . . . . . . . . . . . . . . . . . 10
Peer-to-Peer Lending (up to $25,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
New Microlenders ($50,000 - $100,000) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Green Banks (up to $3 million) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Government-Backed Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The U.S. Small Business Administration Guaranteed Loan Programs. . . . . . . . . . 13
U.S. Department of Energy (DOE) Loan Guarantee program. . . . . . . . . . . . . . . . . 15
Federal Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Federal Small Business Innovation Grants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
State Renewable Energy and Energy-Effciency Grants, Tax Incentives,
and Rebates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Weatherization Assistance Program . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Community and Economic Development Loans and Grants . . . . . . . . . . . . . . . . . . . . 17
Green Business Angel Investors and Venture Capital Funds. . . . . . . . . . . . . . . . . . . . . 19
Green or Clean Tech Angel Networks ($150,000 - $1.5 million) . . . . . . . . . . . . . . . 19
Venture Capital (VC) Organizations ($500k++) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SBA Small Business Investment Companies (SBICs) Program. . . . . . . . . . . . . . 20
SBA New Markets Venture Capital (NMVC) Program . . . . . . . . . . . . . . . . . . . . 21
Fellowships, Competitions and Foundation Awards . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Additional Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
n
TABLE OF CONTENTS
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n
INTRODUCTION
First-time entrepreneurs typically face many challenges in securing fnancing for new
ventures. Because they are unproven in the marketplace, lenders view them as high-risk
borrowers. This has been especially true for entrepreneurs in low-income communities in
the U.S.
This lack of access to capital means fewer new businesses, fewer new jobs, a stagnating
economy, and the stifing of innovative market solutions to social and environmental
problems. The recession and credit crisis have compounded these problems, profoundly
impacting the capital markets and entrepreneurs.
On the one hand, the recession has increased demand for fnancing. Many people start
small businesses during economic downturns because they have lost their jobs, or they
see a new opportunity in the shifting marketplace. A recent study published by the
Kauffman Foundation found that more than half of the companies on the 2009 Fortune
500 list began during a recession.
1
On the other hand, the credit crisis has tightened the
supply of fnancing even as demand has increased. The crisis has led banks to sharply
reduce business loans
2
and credit card companies to reduce borrowing limits and increase
fees. All of this makes it more diffcult for entrepreneurs to secure start-up fnancing.
Conventional and emerging fnancial markets are changing rapidly. While big banks are
folding
3
or being bailed out by the U.S. government, a variety of new and alternative lend-
ers are beginning to provide fnancing to small businesses across the U.S. While micro-
lenders, such as Community Development Financial Institutions (CDFIs), already provid-
ed fnancing to underserved communities, they are now fnding that Middle America also
needs their services to help keep existing businesses afoat.
Part of this change is an unprecedented level of collaboration between public and private
entities in an effort to support small businesses. For example, Goldman Sachs recently
announced a $500 million initiative to support small businesses, and they are contributing
$300 million to support CDFIs in the U.S.
4
1. Kauffman Foundation report: http://www.kauffman.org/uploadedFiles/the-economic-future-just-happened.pdf
2. Retrieved from: http://www.nytimes.com/2008/07/28/business/economy/28credit.html on November 30, 2009.
3. http://www.fdic.gov/bank/individual/failed/banklist.html
4. Retrieved from: http://money.cnn.com/2009/11/17/smallbusiness/goldman_sachs_warren_buffet_small_business/ on Novem-
ber 20, 2009.
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The federal government is also making bold moves to support small businesses. For
example, the American Recovery and Reinvestment Act (ARRA) expands resources avail-
able to small businesses, and supports programs designed to increase business access to
capital and drive economic and community development. By putting funds in the hands
of state and local government agencies and institutions, ARRA also enables these entities
to increase the amount of loans and grants to small business owners in their region.
Although these efforts are promising, they cannot fully make up for the disastrous impact
the recession has had on investments in U.S. startups: a 71% reduction from January 2008
to January 2009.
5
Capital is limited and competition for it is ferce. This guide is intended
to provide some direction for green entrepreneurs, particularly those in underserved com-
munities, looking to navigate this treacherous terrain.
In today’s market, green entrepreneurs enjoy some advantages as they look to secure
fnancing (e.g., growing markets, increasing consumer demand, and the ability to leverage
government tax incentives in the clean energy economy). What is more, green banks and
CDFIs are sprouting up to serve the growing number of green entrepreneurs. Still, these
resources are insuffcient. As an entrepreneur, it is in your best interest to learn as much as
you can about emerging fnancial resources that are specifc to your industry, region, and
sector.
Prior to approaching lenders and investors, you should prepare a business plan that high-
lights the environmental, social and economic impacts of your business. You should also
prepare basic fnancial projections detailing the amount of funds you will need to launch
and scale your business, as well as your projected revenues. For more information on how
to prepare a green business plan, refer to The Green Business Plan Guide, another Green
For All publication.
6
This guide will help you understand the basic landscape of funds available to all small
businesses in the U.S. We have also included specifc programs and resources directed to-
ward green/clean energy entrepreneurs. Although relatively few fnancial resources and
services are targeted specifcally to green entrepreneurs, the number is growing quickly.
This guide also provides resources for those in low-income areas of the U.S. who do not
have adequate experience, credit, or collateral to secure conventional loans.
This document provides a general overview of the public and private sector funds and
5. Retrieved from: http://www.reuters.com/article/rbssRetailCatalogInternetOrder/idUSN0248706620090302 on November 30,
2009.
6. http://www.greenforall.org/CAP_resources/green-business-plan
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support services available to small businesses. It is by no means an exhaustive review.
Rather, it is a primer designed to prepare you for your own research. Once you have a
business plan and fnancial projections for your organization, we recommend that you in-
quire with local government and fnancial institutions about which programs and sources
of funding are best suited for your business.
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nBOOTSTRAPPING YOUR BUSINESS
“Bootstrapping” is the process of starting a business from scratch without outside fund-
ing or capital. A number of Fortune 500 companies, such as Microsoft and EBay, started by
bootstrapping.
7
In simple terms, a bootstrapped business is self-suffcient from inception
and grows incrementally as demand for its product or service increases. Bootstrapping
typically requires that the owners or partners invest a modest sum of money (often less
than $10,000) in order to launch the business. Although the ultimate goal may be to build
a large business offering diverse products or services, a bootstrapped business will focus
frst on something that generates immediate cash fow returns, with minimal cost inputs.
During a recession (when fnancing is hard to come by), bootstrapping is not only smart,
it is almost a requirement for success. Once a bootstrapped startup builds a loyal client
base and brand awareness, it is much easier to raise additional capital, such as loans,
grants, and venture investment. We recommend that while you research available fnanc-
ing for your business, you also think of ways to incorporate bootstrapping techniques into
your business model. This will likely increase your ability to secure additional fnancing.
To learn more about bootstrapping, visit http://venturebeat.com/2008/11/20/the-art-of-
the-bootstrap.
8
Advantages of bootstrapping:
Minimizes debt from large start-up loans •
Forces innovation and creativity by limiting access to funds •
Allows entrepreneurs to maintain ownership and control of their companies in- •
stead of ceding them to investors
Allows entrepreneurs to establish proof of concept, ideally with demonstrable cash •
fow
Allows entrepreneurs to exhibit business development and fnancial management •
skills, which will impress future investors and lenders (if needed)
nPERSONAL NETWORK ($1,000 - $20,000)
Entrepreneurs themselves fund more than 85% of startup businesses, often with the
fnancial support of friends and family.
9
Many entrepreneurs initially reach out to their
7. Retrieved from: http://venturebeat.com/2008/11/20/the-art-of-the-bootstrap/ on November 29, 2009
8. Additional articles on bootstrapping:
http://biz?nance.about.com/od/cashmanagement/ht/Bootstrapping_Your_Startup_Business.htm;
http://www.entrepreneur.com/magazine/entrepreneursstartupsmagazine/2002/october/55776.html
http://www.seattle20.com/blog/Bootstrapping-stories-Financing-Your-Startup-Through-Consulting.aspx
9. Retrieved from: http://smallbusiness.dnb.com/business-?nance/business-loans/10932-1.html on November 29, 2009
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personal and professional networks for debt or equity investments.
10
By raising startup
capital from people who already know and trust you frst, you give yourself time to fur-
ther develop your business plan and fnancial projections before approaching strangers
for funds. Raising even a modest sum can help you begin to purchase supplies, market
your product, make capital investments, build a website, avoid credit card debt, and even
hire someone for technical assistance. Raising money from your personal network can
also prepare you for your eventual presentation to lenders and investors.
11
Tips for raising funds from your personal network:
Be prepared. • While you may know these people, you can increase your chances of
raising funds if you have a business plan, including the environmental, social and
economic impacts of your enterprise.
Know what you’re asking for. • Before you ask for money, decide whether you are
asking for donations, personal loans (which you will repay), or investments (in
exchange for partial ownership of your business). You will need to clearly commu-
nicate to your audience the type of fnancing you are requesting.
Launch an e-mail fundraising campaign. • If you are planning to start a non-proft
organization or a for-proft social enterprise that aims to address a critical social or
environmental issue, you may be able to raise seed donations via an e-mail fund-
raising campaign. Try sending an e-mail to all of your trusted personal contacts
to ask for modest seed donations ($20-$100). If you do this, be sure to include a
brief overview of your proposal, as well as a way for them to donate (e.g., a PayPal
link).
Utilize social media outlets. • You can use Facebook and Twitter to spread the word
about your proposal, provided you don’t give away so much information that you
jeopardize your plans. The Facebook Causes application is a great way to raise
seed donations from your personal online network.
12
Ask for introductions. • The best way to utilize your personal network is to ask
friends and family members if they know anyone who would be interested in
loaning you money or investing in your business. Your goal should be to fnd
individuals who have a personal or professional interest in seeing your business
succeed.
10. Debt ?nancing refers to money that you borrow from lending institutions, friends and family, etc. This money has to be repaid
over time. Equity ?nancing involves selling a portion of your business to investors in exchange for money to launch or grow your
business. Depending on the type of organization you are launching, you may also be able to raise funds via donations and grants,
which do not need to be repaid.
11. For additional information on writing a business plan, refer to the Green For All publication, “The Green Business Plan Guide.”
http://www.greenforall.org/CAP_resources/green-business-plan
12. For more information about Facebook Causes: http://apps.facebook.com/causes/about
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Take legal precautions. • Protect yourself, your business, and your personal rela-
tionships by consulting with lawyers and getting agreements in writing when you
accept loans or investments (even from friends and family members).
nMICROLOANS ($500 - $100,000+)
Micro Finance Institutions (MFIs) provide fnancing and additional support to borrowers
who cannot access capital from traditional lending institutions like banks. MFIs specialize
in lending small amounts of money to small companies or entrepreneurs in need. MFIs
and other microlending organizations differ substantially from one another, and many
focus on specifc target populations. Microlenders can be private, public, for-proft or non-
proft institutions. They are typically community-based non-profts funded by a mix of
Small Business Administration (SBA) funds, community development funds, philanthro-
pists, and foundations.
Microlending is targeted toward “microenterprises,” or businesses requiring less than
$35,000 startup capital and with fve or fewer employees.
13
Due to the current scarcity of
bank loans and shrinking credit card limits, many established business owners are also
approaching microlenders for gap fnancing and working capital loans. Since 2008, micro-
lenders across the U.S. have reported a nearly 50% increase in demand for loans. They are
pressuring the government to provide additional funds so they can meet this need.
14
The
average microloan is $13,000, typically payable over six years with interest rates ranging
between eight and thirteen percent.
15
While interest rates for microloans can be higher than for standard loans, they are often
easier to obtain. Eligibility differs depending on the lending organization, but the borrow-
er typically needs to have a credit score of at least 575, no recent bankruptcies, an ability to
personally guarantee the loan (or a cosigner), and demonstrably suffcient income to cover
payments. Startup companies are often given special considerations, but in this lending
environment, you should not expect too much leniency.
Some advantages of microloans:
Many have specifc social and need-based lending criteria. •
Some are focused on social entrepreneurs who plan to address environmental, •
social and/or economic development problems within their communities.
They may have more fexible credit standards. •
Loans can be personally guaranteed. •
13. Retrieved from AEO website: http://www.microenterpriseworks.org on November 30, 2009
14. Retrieved from: http://www.microenterpriseworks.org/index.asp?bid=4139 on November 30, 2009.
15. Retrieved from: http://www.sba.gov/smallbusinessplanner/start/?nancestartup/SERV_LT_MICRO.html on March 24, 2010.
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Below, we go into a little more detail about two common microlending models in the
U.S.: Community Development Financial Institutions (CDFIs) and Microenterprise
Development Organizations (MDOs)
Community Development Financial Institutions (CDFIs)
CDFIs are community development banks, credit unions, loan funds and venture funds
that provide fnancial services, loans, education and business support to small busi-
nesses, oftentimes in underserved communities. More than 1000 CDFIs in the U.S. help
individuals with little or no banking experience open bank accounts, learn about fscal
responsibility, and borrow money to start businesses.
16
With the recession making it dif-
fcult or impossible for small businesses to secure loans from conventional banks, demand
for fnancing through CDFIs has grown signifcantly since 2008. ARRA has alleviated
this somewhat, allocating an additional $100 million in funds to the CDFI Program in
February 2009.
17
Right now, not many CDFIs focus on helping green entrepreneurs. We expect this to
change quickly due to the emergence of green businesses, as well as CDFIs’ advanta-
geous position for leveraging their expertise to help local green businesses.
18
Some “green
banks,” such as Shoreline Pacifc, are also CDFI-certifed institutions (see Section V of this
guide, Green Banks).
Examples of CDFIs operating in the U.S.:
Seedco Financial Services •
19
(loans up to $200,000)
A CDFI committed to supporting community development through investing in
low-income communities
ACCION USA •
20
($500 - $50,000)
One of the largest microlending institutions in the U.S. serving low- to moderate-
income communities
Non-Proft Finance Fund •
21
(typically $100,000 - $2 million)
A CDFI that provides loans to non-profts that have been in existence for at least
three years and have an annual operating revenue of at least $500,000
Georgia Green Loans •
22
($500 - $35,000)
A green CDFI offering microloans to green entrepreneurs
16. Retrieved from: http://www.cd?.org/ on November 30, 2009.
17. Retrieved from: http://www.cd?fund.gov/recovery/ on March 24, 2010.
18. For more information on the potential for green CDFIs: http://www.nextamericanopportunity.org/ce/bgg/
19. http://www.seedco.org/
20. http://www.accionusa.org
21. http://www.nonpro?t?nancefund.org/
22. http://www.georgiagreenloans.org/
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For more information about CDFIs, please visit one of the following sites:
Federal Government CDFI Fund: http://www.cdffund.gov/ •
CDFI Coalition: http://cdf.org •
To fnd a CDFI near you: http://cdf.org/index.php?page=info-4 •
Microenterprise Development Organizations (MDOs)
Some MDOs are CDFI-certifed and can provide loans with favorable terms. But MDOs
are perhaps better known for their efforts to build the capacity of microenterprises by
teaching critical business and fnancial skills.
For more information about MDOs:
FIELD’s Online Microenterprise Program Directory • lists programs offering
microloans, technical business support and other services to microenterprises.
(http://feldus.org/Publications/Directory.asp).
The Association for Enterprise Opportunity (AEO) Membership Directory • lists
microenterprise development resources by state. (http://www.microenterprise-
works.org/index.asp?bid=282).
Peer-to-Peer Lending (up to $25,000)
The online success of Kiva.org popularized “Peer-to-Peer” lending. Kiva.org empowers
individuals to lend to unique entrepreneurs around the globe. These microloans (often
as small as $25) help alleviate poverty overseas while providing a rewarding experience
for lenders, who can select the individual or group to receive their loans. Recently, Kiva
announced that it would begin providing Peer-to-Peer loan services for U.S.-based entre-
preneurs as well.
23
Kiva is not the only organization providing this type of lending service
in this country; a number of other Peer-to-Peer companies are emerging. Kiva is at one
end of the spectrum, where the microlender is more interested in social change than the
fnancial return, which may be as low as 0%. At the other end, companies like Prosper and
Lending Club are enticing people to invest in a microlending model with an eye towards
more signifcant fnancial returns. Some of these emerging companies are facing challeng-
es with the U.S. Securities and Exchange Commission (SEC), so availability of loans from
these sources may vary.
23. Retrieved from: http://www.techcrunch.com/2009/06/10/kiva-brings-microlending-home-to-us-entrepreneurs-in-need/ on
November 30, 2009
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Examples of Peer-to-Peer lending organizations in the U.S.:
Kiva •
24
Prosper •
25
Lending Club •
26
Loanio •
27
New Microlenders ($50,000 - $100,000)
The credit crisis is currently driving innovation in lending markets. Entrepreneurs are
struggling to pay their bills and keep their doors open, creating an opportunity for new
fnanciers to step in and offer small loans—sometimes at steep interest rates.
28
We expect
to see more of these innovative microlenders forming in the future to meet the growing
demand for working capital and startup loans.
Examples of New Microlending institutions in the U.S.:
Grameen America: • http://www.grameenamerica.com/
In 2007, Grameen America, a non-proft, launched a pilot offce in New York to
bring the model of microfnancing popularized overseas to the U.S. Muhammad
Yunus, who won the Nobel Peace Prize for his microcredit efforts in Bangladesh, is
spearheading this effort in the U.S.
On Deck Capital: • http://www.ondeckcapital.com
On Deck Capital is a private lender specializing in loans for small businesses that
banks or conventional lenders might consider too risky. On Deck Capital recently
announced a partnership with the Urban League to offer loans for small business-
es through Urban League affliates.
29
nGREEN BANKS (UP TO $3 MILLION)
In the wake of the credit crisis, a handful of new, emerging banks are aiming directly at
supporting green entrepreneurs.
30
These “green banks” provide traditional banking ser-
vices with a green twist. They offer personal and business checking and saving accounts,
as well as loans and other fnancial services. What sets these banks apart from more con-
ventional banks is that they are founded on “triple bottom line” guiding principles—both
24. http://www.kiva.org
25. http://www.prosper.com
26. http://www.lendingclub.com
27. http://www.loanio.com
28. Retrieved from: http://online.wsj.com/article/SB122347723865615409.html on December 2, 2009
29. Retrieved from: http://www.startribune.com/business/70347757.html on November 30, 2009.
30. Retrieved from: http://archives.chicagotribune.com/2009/jun/16/business/chi-tue-green-banking-jun16 November 30, 2009
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internally and via their lending activities. For example, when underwriting a loan, a green
bank may take into account the sustainability, energy-effciency, or social equity impacts
of the loan applicant. Green banks also offer products like loans for renewable-energy in-
stallations or green building activities. In general, their lending policies favor individuals
and businesses that have a positive impact on the environment and their local community.
Green banking is just taking shape. Even in the midst of this recession, the idea seems to
have power. Even as the recession was beginning in early 2008, First Green Bank exceeded
its fundraising goals.
31
Examples of green banks in the U.S. that are already open, or plan to open in 2010:
ShoreBank Pacifc •
32
—Ilwaco, Washington (FDIC member)
Sustainable bank focusing on “triple bottom line” business philosophies for them-
selves and their customers. Support and fnancial services available for for-proft
and non-proft businesses. Shorebank is also a certifed CDFI.
New Resource Bank •
33
—San Francisco, California (FDIC member)
A community bank focusing on effciency, sustainability and community building.
New Resource Bank offers specifc loans and certifcates of deposit (CDs) for solar
installations.
First Green Bank •
34
—Florida (FDIC member)
Promotes environmental and social responsibility.
Green Bank •
35
—Texas (FDIC member)
Committed to environmentally and socially responsible practices.
e3bank •
36
—Malvern, Pennsylvania (Opening in 2010)
e3bank will be a B Corporation,
37
and will be committed to building sustainable
communities and businesses, protecting the environment, and promoting social
equity.
GreenChoice Bank •
38
—Chicago, Illinois (Opening in 2010)
A local, community bank with a sustainable mission, LEED-certifed branch con-
struction, and operational and lending policies that support sustainable practices.
31. Retrieved from: http://www.nytimes.com/gwire/2009/04/06/06greenwire-green-banks-sprout-from-ruins-of-economic-
cris-10437.html November 30, 2009.
32. http://www.eco-bank.com/
33. http://www.newresourcebank.com
34. http://www.?rstgreenbank.com/
35. http://www.greenbank.com
36. http://www.e3bank.com/contact
37. For more information on B corporations: http://www.bcorporation.net/
38. http://www.greenchoicebank.com
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nGOVERNMENT-BACKED LOANS
When the government backs a loan, it promises to repay a major proportion of the debt
should the borrower default to the bank. Government-backed loans are designed to
increase loans made to start-up and small businesses, which lending institutions would
otherwise deem too risky.
The U.S. Small Business Administration Guaranteed Loan Programs
The Small Business Administration (SBA) is a federal agency responsible for assisting
small businesses. Depending on the industry you are in, where you are located, and what
stage you are in forming your business, the SBA offers a variety of technical, fnancial, and
contracting support services designed to help you succeed. This guide focuses only on se-
lect fnancial services offered by the SBA. For additional information regarding SBA loans
and free technical assistance, please visit http://www.sba.gov/aboutsba/sbaprograms/
index.html.
The SBA does not make loans directly to businesses, but rather guarantees the loans that
banks and other lending institutions make to small businesses. The SBA also has two
little-publicized environmental loan programs: the Energy Conservation Loan Program
and the Pollution Control Loan Program. To inquire about the availability of SBA loans in
your area, contact local banks and ask to speak with a loan offcer regarding SBA loans.
Examples of SBA loan-guarantee programs available to American businesses:
39
Energy Conservation Loa • n
40
This loan is for small businesses that design, manufacture, distribute or install
devices that conserve energy. These loans are not for the end user of the product.
End-user businesses needing a loan to install renewable energy devices can apply
for a 7(a) loan.
Pollution Control Loan Program •
41
This loan provides fnancing for small businesses to install pollution-control facili-
ties (including recycling).
7(a) Loan Program • (maximum is currently $2 million, but this cap may soon in-
crease to $5 million)
42
This is the most common and fexible loan program for start-up or existing small
businesses. Most U.S. banks participate in this program, and borrowers can use
39. Quick reference guide to SBA Loans:
http://www.sba.gov/idc/groups/public/documents/wv_clarksburg/wv_sbaquickreferenceguide.pdf
40. For additional information about the Energy Conservation Loan Program:
http://www.energystar.gov/index.cfm?c=sb_state.sba_loans
41. For additional information about the Pollution Control Loan Program:
http://www.energystar.gov/index.cfm?c=sb_state.sba_loans
42. For additional information about the SBA 7(a) Loan Program:
http://www.sba.gov/?nancialassistance/borrowers/guaranteed/7alp/FINANCIAL_GLP_7A_TERMS.html
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these funds for a variety of purposes such as start-up or working capital needs,
equipment purchases, renovations, property acquisition, or debt restructuring.
43
The terms of 7(a) loans are negotiated on a case-by-case basis, but they are typical-
ly structured as long-term loans with favorable interest rates. Eligibility is restrict-
ed to for-proft businesses that meet SBA small business size standards.
44
7(a) Express Loans • (up to $350,000)
These loans have streamlined application and review procedures, and offer a 36-
hour response turnaround.
45
Community Express • loans are specifcally for borrowers in underserved
and distressed communities, such as the SBA’s Historically Underutilized
Business Zones (HUBZones).
46
Patriot Express • loans are designed for businesses owned and controlled by
veterans (minimum 51% ownership).
7(a) Small/Rural Lender Advantage Loans • (S/RLA) (up to $350,000)
The SBA initiated the S/RLA program in 2008 to promote lending in small, vulner-
able communities facing high unemployment, population loss, etc.
47
The program
streamlines the application process with a one-page application and a 3-5 day
processing turnaround.
Certifed Development Company Loan Program • (CDC/504) (up to $2 million)
The CDC/504 loan program is designed for purchasing fxed assets, such as
equipment or property, as well as for fnancing construction or renovations. The
program allows borrowers to purchase real estate with low down payments,
long-term fnancing, and competitive interest rates. These loans cannot be used
for start-up funds or working capital. The SBA recently changed its rules to allow
borrowers to refnance existing fxed-asset loans as part of a 504 expansion loan
(as long as the refnancing portion is less than 50% of the total expansion cost).
48
Eligibility is restricted to for-proft businesses that meet SBA small business size
standards.
Microloan Program • (increased from $35,000 to $50,000 maximum in 2009)
49
Microloans are short-term loans for startup or expansion. They can be used for
working capital, inventory and equipment purchases. These loans cannot be used
43. For additional information on 7(a) loans: http://www.sba.gov/?nancialassistance/borrowers/guaranteed/7alp/index.html
44. SBA Size standards: http://www.sba.gov/contractingopportunities/of?cials/size/index.html
45. For more information on 7(a) Express loans: http://www.sba.gov/?nancialassistance/borrowers/guaranteed/7alp/FINANCIAL_
GLP_7ALP_EXPRESS.html
46. http://www.sba.gov/hubzone/
47. For more information about the S/RLA program: http://www.sba.gov/rurallenderadvantage/
48. Retrieved from: http://online.wsj.com/article/SB124588146947550063.html on November 29, 2009.
49. Retrieved from: http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=200910210065
30&newsLang=en on November 30, 2009.
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to pay debt or purchase real estate.
50
These loans are administered through mi-
crolending institutions (see previous section). To fnd microloan partners listed
by state, please see http://www.sba.gov/idc/groups/public/documents/
sba_homepage/serv_microloan_intermediary.pdf. Eligibility is restricted to for-
proft businesses that meet SBA small business size standards, as well as non-proft
childcare centers.
America’s Recovery Capital (ARC) Loan • (up to $35,000)
The ARC loan is a temporary program that the SBA is offering to existing small
businesses experiencing fnancial hardship. The loans are interest-free and 100%
backed by the SBA.
51
They are designed to help businesses make principle and
interest payments on other existing loans so that they can free up funds for build-
ing their business and saving jobs. The ARC program is part of ARRA, and loans
are available from SBA commercial lenders until the money runs out, or September
30, 2010, whichever comes frst. Eligibility is restricted to existing for-proft small
businesses that were proftable in the past but are currently experiencing fnancial
hardship, and that have qualifying small business loans.
U.S. Department of Energy (DOE) Loan Guarantee program
The DOE Loan Guarantee Program is intended for projects that “avoid, reduce, or seques-
ter air pollutants or anthropogenic emissions of greenhouse gases” and “employ new or
signifcantly improved technologies as compared to technologies in service in the United
States at the time the guarantee is issued.”
52
These loans are typically very large—in the
multimillion-dollar range for large-scale projects. For example, Solyndra (a solar manufac-
turing company) was awarded a $535 million dollar loan guarantee in March 2009.
53
Its lengthy and costly application process has led to mixed reviews for this program from
the private sector.
54
In October 2009, the DOE announced a new Financial Institution
Partnership Program (FIPP) designed to leverage public and private partnerships to expe-
dite the Loan Guarantee Program.
55
To apply for a loan guarantee, you must search for a solicitation on this website: http://
www.lgprogram.energy.gov/keydocs.html
50. http://www.sba.gov/?nancialassistance/borrowers/guaranteed/mlp/index.html
51. http://www.sba.gov/recovery/arcloanprogram/REC_WHATISARCLOAN.html
52. Retrieved from: http://www.lgprogram.energy.gov/features.html On November 28, 2009
53. Retrieved from: http://cleantech.com/news/4286/solyndra-nabs-535m-doe-loan-500-mw on November 25, 2009.
54. Retrieved from: http://www.greentechmedia.com/articles/read/doe-loan-guarantee-is-it-a-good-deal/ on November 30, 2009.
55. Retrieved from: http://www.lgprogram.energy.gov/press/100709.pdf on November 28, 2009.
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nFEDERAL GRANTS
A handful of federal grants are available to businesses involved in energy effciency and
technology innovation. Each program has different guidelines and requirements. In many
cases, grantees do not need to repay the awarding agency. Finding and applying for these
grants can be confusing for entrepreneurs who have not previously dealt with the federal
government. If you plan to apply for one of these grants, prepare to be persistent and pa-
tient with the required forms and the online registrations necessary to access information.
Federal Small Business Innovation Grants
Two federal programs provide highly competitive grants to startups and small businesses
engaged in research and development (R&D) and technological innovation. The Small
Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR)
programs administer grants through 11 different federal agencies. If you are engaged in
scientifc R&D, or you are working on a new technology that has commercial appeal, you
may want to explore these grant programs in more detail by visiting http://www.busi-
ness.gov/expand/green-business/product-development/innovation.html.
Select agencies offering SBIR/STTR grants that may appeal to green entrepreneurs:
Department of Agriculture (USDA) •
Department of Energy (DOE) •
Department of Health and Human Services •
Environmental Protection Agency (EPA) •
National Oceanic and Atmospheric Administration (NOAA) •
National Science Foundation •
For additional information on government loans, grants, bonds and tax incentives for
small businesses, visit: http://www.business.gov/fnance/fnancing/
nSTATE RENEWABLE-ENERGY AND ENERGY-EFFICIENCY GRANTS,
TAX INCENTIVES, AND REBATES
A number of federal, state and local incentives and policies across the U.S. promote en-
ergy effciency and the use of renewable-energy technologies. Unfortunately, given the
wide variety of policies across the country, this guide cannot provide a comprehensive or
exhaustive review of them all. Instead, we recommend you research available tax incen-
tives and rebates available in your state that apply to your specifc business.
For comprehensive information on energy-effciency and renewable-energy incentive pro-
grams in your state, please reference one of these three sites:
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17
http://www.dsireusa.org/ •
http://www.energystar.gov/index.cfm?c=sb_join.sb_fnanceproducts •
http://www.energystar.gov/index.cfm?c=tax_credits.tx_index •
Weatherization Assistance Program
The U.S. DOE Weatherization Assistance Program (WAP) provides funding through state
agencies to help low-income individuals and families reduce energy costs.
56
Under WAP,
state or federal funds may also be available for companies that create new jobs or offer
job training to conduct energy-effciency upgrades. Contact your state energy agency to
inquire about available funds and programs.
57
nCOMMUNITY AND ECONOMIC DEVELOPMENT LOANS AND GRANTS
A number of new and existing federal programs are designed to promote energy conser-
vation, the use of renewable energy, economic and community development, green job
growth, and small business development. For example, ARRA provided new funds to
state agencies for green-job training
58
and the Energy Effciency and Conservation Block
Grant (EECBG) Program.
59
Most federal funds allocated through ARRA and other poli-
cies are awarded to state and local government agencies and tribes, which in turn distrib-
ute these funds to individuals and businesses on a case-by-case basis. Loans and grants
distributed by state and local agencies often have low interest rates and deferred payment
plans designed to help startup businesses succeed and help small business achieve scale.
In order to receive these funds, you must apply and compete with other business owners
and entrepreneurs. It is critical for you to understand the specifc goals of the programs
for which you are applying. In your business plan and application, be sure to clearly state
the positive environmental and community development impacts of your business. Also
highlight the number of green jobs you will be creating in your area.
Once you have a business plan, you should contact your local city or county development
offce, or one of the agencies listed below, to inquire about loans and grants for which you
may apply.
56. For more information about the WAP, please go to: http://apps1.eere.energy.gov/weatherization/apply.cfm and also refer to
the Green For All guide “Understanding the Weatherization Assistance Program”: http://www.greenforall.org/resources/reports-
research/wap. A helpful fact sheet can also be found here: http://apps1.eere.energy.gov/weatherization/pdfs/wx_recovery_fact_
sheet.pdf
57. For a list of state WAP contacts, go to: http://apps1.eere.energy.gov/weatherization/state_contacts.cfm
58. Green For All Guide “Understanding the Competitive Grants for Green Jobs Training”: http://www.greenforall.org/resources/
reports-research/understanding-the-competitive-grants-for-green-jobs-training
59. http://www.eecbg.energy.gov/
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Here is a list of some helpful places to start:
City/County Development offce •
If your city does not have a specifc development offce, ask for the staff member in
your city government who handles community development issues.
Examples:
http://www.lacdc.org/CDCWebsite/home.aspx
http://oaklandnet.com/government/ceda/
City/County Redevelopment Agencies •
Redevelopment areas are specially created districts within blighted communi-
ties, where local property taxes are collected for a dedicated redevelopment fund.
These funds are then used to encourage economic development in these areas
through fnancial and technical support to small businesses.
Examples:
http://www.hudsonedc.org/
http://www.thejcra.org/
http://www.crala.org/
State Redevelopment Associations •
Example:
http://www.calredevelop.org
State or county Workforce Investment Boards (WIBs) •
These entities typically receive green-job training funds
Example:
http://www.cwib.ca.gov/
National Community Development Association •
Example:
http://www.ncdaonline.org/
Below is a brief summary of the Community Development Block Grant programs, one
other major source of economic development funds at the state and local level. These
funds will be available to you through your state, city or county government offces.
Community Development Block Grant (CDBG) Program
CDBG is a program of the federal Housing and Urban Development Department (HUD).
Based on the size of their low- and moderate-income populations, CDBG provides state
and local governments with fnancial resources to stabilize local communities and provide
local jobs. When applying for these grants, it is critical to demonstrate the impact your
business will have on the local economy. You will be required to estimate the number of
full-time equivalent (FTE) jobs your business will create. For more information on CDBG,
please see this site: http://portal.hud.gov/portal/page/portal/RECOVERY/programs/
COMMUNITY
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nGREEN BUSINESS ANGEL INVESTORS AND VENTURE CAPITAL FUNDS
Many startup and early-stage companies with unproven ideas and technologies do not
have access to suffcient credit to launch their businesses. These entrepreneurs often turn
to angel investors (angels) or venture capital (VC) frms for funding. Angels and VCs
provide both debt (loans) and equity fnancing (investment in exchange for part owner-
ship of your business). Angel investors and VCs are focusing on the green business and
clean technology (clean tech) sectors in numerous ways. If your business plan has been
well received and you are confdent about your organization’s chances for success, you
may want to consider approaching angels or VCs that focus on your industry. Each deal
is structured differently; some investors may want a say in how you run your business
(e.g., a seat on the board), whereas others may simply provide fnancing in exchange for
prospective returns (“silent investor”). You should consult a lawyer prior to signing any
agreements with investors.
Green or Clean Tech Angel Networks ($150,000 - $1.5 million)
Angel investors are individual investors, or groups of investors that invest in early-stage
startup companies. Angels typically provide “bridge” fnancing to companies after the
self-funding or bootstrapping stage, and prior to VC funding.
60
Some also provide seed
capital. Angel investment terms tend to be more fexible than VC investment terms.
Examples of Green/Clean Tech Angel Investors:
Investors Circle •
61
A nonproft network comprised of angel investors, professional venture capital-
ists, foundations, family offces, and others who use private capital to promote the
transition to a sustainable economy.
The Cleantech Angel Network of Networks •
62
A network of leading clean technology angel investors created to exchange deal
fow information, improve clean tech education, and connect clean tech entrepre-
neurs with early-stage investors.
EcoElectron Ventures •
63
A seed-stage capital investment fund focusing solely on clean-energy companies
located in Southern California. They provide strategic planning, business manage-
ment, and equity to startup and early-stage companies.
60. For additional information on Angel Investments: http://www.smallbusinessnotes.com/?nancing/angelinvestors.html
61. http://www.investorscircle.net/
62. http://www.cleantechangels.org
63. http://www.ecoelectron.com/
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Venture Capital (VC) Organizations ($500k++)
Unlike angel investors who invest in startup companies, VCs typically fund established
companies as they look to expand. VCs generally invest signifcantly larger sums of
money, albeit in fewer companies, than their angel counterparts. For example, in 2006, VC
companies in the U.S. invested in 2,900 frms with an average investment of $8.9 million,
whereas angels invested in 51,000 businesses with an average investment of $500,000.
64
While there are a large number of VC frms in the U.S., many of them have very distinct
focal areas. Only a very small portion of these frms considers investments in companies
with an environmental and a social mission. That said, the federal government is also
partnering with private VC frms to stimulate economic growth and to help some of these
small businesses achieve scale.
For more information about Green VC funds or community development venture funds,
see the following:
SJF Ventures •
65
SJF Ventures is a venture capital partnership. Through its investment funds, the
frm provides equity fnancings from $500K to $5MM, solo or in syndicates, to
companies seeking expansion capital. SJF looks to partner with entrepreneurs who
are committed to impacting the world positively through their businesses.
Greenvc.org •
66
Provides resources and information for green entrepreneurs.
Community Development Venture Capital Alliance (CDVCA) •
A network of community development venture capital investors who invest in
businesses in economically distressed areas in the U.S. and abroad.
67
Investments
are made in companies at different stages of development, from startup to ex-
pansion. For a list of CDVCA Member funds offering fnancing, see this website:
http://www.cdvca.org/index.php?option=com_content&view=category&id=42&
Itemid=66
Examples of public/private VC partnerships currently active in the U.S.:
SBA Small Business Investment Companies (SBICs) Program
Licensed by the SBA,
68
Small Business Investment Companies (SBICs) are privately owned
venture funds that offer equity fnancing for small businesses. The SBA also offers an ad-
ditional designation for “Specialized Small Business Investment Companies” (SSBICs),
which solely fund small businesses owned by socially or economically disadvantaged
64. Retrieved from: http://www.nsf.gov/statistics/seind08/c6/c6s8.htm on December 2, 2009.
65. http://www.sjfund.com/
66. For the Green VC list of green and social VC ?rms: http://www.greenvc.org/green-and-social-venture-capital.html
67. For additional information: http://www.cdvca.org/
68. http://www.sba.gov/?nancialassistance/borrowers/vc/sbainvp/index.html
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persons. SBICs are government and private-sector partnerships aimed at funding small
businesses in the U.S. The SBA provides funds to SBICs, and in turn SBICs invest in small
businesses. Eligibility is restricted to small businesses with a net worth under $18 million.
To fnd SBICs near you, visit http://www.sba.gov/aboutsba/sbaprograms/inv/locals-
bic/index.html
SBA New Markets Venture Capital (NMVC) Program
The NMVC program is similar to the SSBIC program. NMVC companies are privately
owned and managed funds, licensed by the SBA, that make equity investments in small
businesses in distressed communities. Eligibility is restricted to Smaller Enterprises (net
worth less than $6 million) in “Low-Income Geographic Areas.”
69
For a list of NMVC
funds, visit http://www.sba.gov/aboutsba/sbaprograms/inv/nmvc/INV_NMVC_
COMPANIES.html?cm_sp=ExternalLink-_-Federal-_-SBA.
Additional resources for angel and VC frms in the U.S.:
List of Venture Capital Organizations in each region of the U.S • .
http://www.nvca.org/index.php?option=com_content&view=article&id=106&Ite
mid=134#regional
Energy Venture Capital and Angel Investors List •
A list of frms investing in energy companies and clean tech companies.
http://energypriorities.com/entries/2005/11/energy_venture.php
The Funded.com •
An online community of entrepreneurs that researches, rates, and reviews funding
sources worldwide.
http://www.thefunded.com
nFELLOWSHIPS, COMPETITIONS AND FOUNDATION AWARDS
A handful of U.S. foundations offer highly competitive fellowships and grants for entre-
preneurs with proposals or existing businesses that address critical social or environmen-
tal issues in the U.S. and abroad. If your proposal or organization has received a lot of
attention and has been endorsed by well-known entities, we strongly encourage you to
consider applying for one of the fellowships or awards listed below. Please be aware that
the application process can be challenging and lengthy, so we recommend that you apply
only if you suspect you have a good chance of winning. (Please also keep in mind that
there are typically application fees.)
69. For additional NMVCC eligibility information: http://www.sba.gov/aboutsba/sbaprograms/inv/nmvc/INV_NMVC_PROGOV-
ERVIEW.html
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Examples of awards and competitions:
The Skoll Awards for Social Entrepreneurship •
70
These are extremely competitive three-year grants ($765,000 each) for social entre-
preneurs tackling critical issues in the areas of health, economic and social equity,
peace and security, institutional responsibility, and environmental sustainabil-
ity. Out of hundreds of applicants each year, only a handful are awarded grants.
Eligibility is restricted to non-proft and for-proft organizations with a successful
track record (minimum of three years in operation).
Echoing Green Fellowship •
71
Provides seed funding ($60,000-$90,000) for 12-15 fellows per year. Eligibility is
restricted to non-proft and for-proft startup social enterprises.
Cleantech Open •
72
A business plan competition for clean tech companies that promote environmental
sustainability. Eligibility is restricted to startup companies, comprised of at least
two individuals, with less than $500,000 of outside funding.
Clean Tech Open Grants Program •
73
A trial program that includes access to funds, workshops and training, and sup-
port with federal contract bids. Eligibility is restricted to companies already ship-
ping a product, or very close to doing so.
Draper Richards Foundation •
74
Funds select social entrepreneurs for three years, providing $100,000 per year.
Eligibility is restricted to non-proft startups.
The Energy Foundatio • n
75
Makes grants to non-profts that aim to increase energy effciency and promote the
use of renewable energy in the U.S. and China. Eligibility is restricted to non-prof-
its with regional impact.
Green VC’s Resources for Business Plan Competitions and Awards •
http://www.greenvc.org/business-plan-competitions.html
http://www.greenvc.org/fellowships-awards.html
70. http://www.skollfoundation.org/skollawards/index.asp
71. http://www.echoinggreen.org/fellowship
72. http://www.cleantechopen.com
73. http://www.cleantechopen.com/app.cgi/content/programs/grants
74. http://www.draperrichards.org/
75. http://www.ef.org
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CONCLUSION
As the variety of resources listed in this document shows, a large number of public and
private programs are designed to support small businesses seeking fnancing. Both the
public and private sector recognize that green entrepreneurs are capable of catalyzing an
economic recovery that protects the environment and is inclusive of all citizens. Together,
hard-working, innovative entrepreneurs and collaborative public and private partner-
ships are creating a historic opportunity to repair the damaging effects of social and envi-
ronmental inequalities in the U.S.
n
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ADDITIONAL
RESOURCES
Green For All Publications
The American Recovery and Reinvestment Act: A Guide for Small Businesses and
Nonprofts
http://www.greenforall.org/what-we-do/capital-access-program/business-guide-to-the-
recovery
Bringing Home the Green Recovery: A User’s Guide
http://www.greenforall.org/resources/recoveryusersguide
Minority Business Development Agency (MBDA) (U.S. Department of Commerce)
A Federal agency created specifcally to foster the establishment and growth of minority-
owned businesses in America.
MBDA fnancing resources: http://www.mbda.gov/?section_id=3
MBDA Capital Locator (coming soon):
http://www.mbda.gov/index.cfm?fuseaction=crl.main
Community Investing Center resources
http://www.communityinvest.org/resources/add.cfm
Others:
Seedco small business recovery report Crisis on Main Street:
http://www.seedco.org/documents/publications/Seedco_Small_Business_Recovery.pdf
Startup Fundraising 101 presentation:
http://entrepreneur.venturebeat.com/2009/07/08/startup-fundraising-101/
n
doc_876563951.pdf