3. Presentation Objectives Introduce SBA Programs – 15 min. DVD Summarize SBA’s Environmental Policies Highlight the… – Energy Conservation Loan Program – Pollution Control Loan Program Q & A after the presentation. Please mute your phones.

4. Cathy Lease Lender Relations Specialist Arizona District Office 19 years with SBA Phone (602) 745-7231 Email: cathleen.lease@sba.gov

5. Small Business Administration Created in 1953 to promote small business in our domestic economy. Serves as primary advocate for small business in the federal government. Engaged in procurement, capital formation, disaster assistance, and small business counseling.

6. SBA’s Environmental Programs

7. SBA Environmental Policy SBA has a strong lender compliance requirement that states: – SBA requires an investigation and assessment of the environmental risk on all primary collateral offered as security for any SBA loan in order that the risks of environmental contamination can be assessed and addressed before the loan is approved. Further, SBA shall comply with the National Environmental Policy Act and any appropriate EPA regulations to insure our loan making takes into consideration the environmental consequences which may significantly affect the quality of the human environment including an analysis of the environmental impact and if adverse effects cannot be avoided then develop alternatives prior to loan approval. Source: SOP 90-77, PN 5000-685, EPA “All Appropriate Inquiry Rule”, and the Environmental Policy Act, 42 U.S.C. §§ 4321

8. Typical Small Business Access Capital Based on latest SBA research, self-funding is the most typical approach followed by: 1. Asking friends or family for money. 2. Cashing in retirement assets or savings. 3. Asking customers for advance deposits or pre-pay. 4. Using Credit Cards. 5. Private investors or “Angels” 6. Borrowing money from a bank.

9. Environmental Capital Access Specialized lenders or sources. Many rely on internal financing. Targeted non-profit or government financing programs. Grants from other agencies or governments. Tax incentives from regulatory agencies as offsets.

10. Environmental Capital Access VERY FEW OF THESE SOURCES WORK FOR MOST SMALL BUSINESSES…

11. Finding Environmental Capital For any business to grow, access to capital is critical even for unplanned reasons such as pollution control or energy conservation. For small business owners, it can be so demanding that it takes on it’s own life. The search can be very frustrating and time intensive. Few lenders interested because of the risk, profit model and expensive upfront costs. However, most turn to loans to finance energy conservation.

12. Borrowing Money SBA issues loan guarantees to financial institutions, usually banks, to guaranty loans made to small businesses. This allows a lender to offer a loan the borrower can afford. Are we successful? – Try about $1.2 billion a year in Arizona. – In 2007, we estimate that over $180 million went towards energy conservation, pollution control or related uses such as plant modernization or retrofitting.

13. Why SBA? SBA allow lenders to provide financing to small businesses when funding is otherwise unavailable on reasonable terms including where environmental risk may be an issue.

14. Typical $100,000 Loan BASIS: Prime (7.0) + 2 ¾% ; 10 Year Term ; Purpose: Energy Conservation SBA 7(a) LoanCommercial Loan First year payments (P&I)$ 15,692.40 $ 24,000.00 Initial fees and costs 2,500.00 (1) 1,500.00 (2) Renewal fees @ maturity 0 2,152.29 (3) 1 st Year Cost to Borrower $ 18,192.40 $ 28,502.29 Renewal balance 0 86,819.63 Roll Over Cost w/Balance$ 18,192.40 $ 115,321.92 (1) SBA fee $2,000 plus $500 in closing costs (2) Commercial loan fee of $1,500 (3) Renewal fee of 1 ½ % ($1,302.29) plus closing fees of $850 (4) Assessed July 2005; Based on moderate to high environmental risk and five lenders reporting.

15. SBA Financial Assistance Loans – SBA offers loans up to $2 million with an 75% guarantee. Equity Investment – Venture capital funding by SBA-licensed small business investment companies Surety Bonds – Guaranties of bid, performance and payment bonds Sound Presentation