My bank is making loans

Last week I mentioned that I was applying for a bank loan (The Green CPA: Local Banks Still Making Loans) and that I would report back on my results.

I stopped by my bank this morning and found out my new business was approved for a VISA card as well as a $10,000 3 to 5-year fixed rate loan to acquire equipment. The loan fee was 1% with a 10 percent rate. This feels a bit steep but there you have it.

I'm sure I could have gotten approved for more but I'm not likely to use this loan since I have access to cheaper sources of money. The point of the story remains the same - local banks with whom you have a relationship are making loans, even in this uncertain market.

BGI Pride

Kevin Maas, a Bainbridge Graduate Institute colleague, and his brother Daryl, are the founders of Farm Power Northwest. Tomorrow they break ground for an anaerobic digester (shit composter) up in the Skagit Valley. The digester creates energy from manure by burning the methane and thus preventing the release of this dangerous greenhouse gas. It also reduces runoff and odor usually associated with dairy farming “waste.” This particular digester will handle the waste from two farms.

Some of the dignitaries on hand for the groundbreaking include Congressman Rick Larsen and representatives from the US Department of Agriculture to present a $500,000 federal grant; state senator Mary Margaret Haugen and "First Husband" Mike Gregoire will present a $500,000 state grant (joined by representatives of Skagit County and the Washington Department of Community, Trade, and Economic Development). Shorebank Pacific is their lender.

Kevin developed his business plan while attending BGI and I just wanted to give he and Daryl a huge thumbs up for their continued success and for the achievement of this important milestone.

Tax breaks for the green community

The latest tax bill has some nice benefits for the sustainability community to help us green our economy. For instance, starting in 2009, employers can give bicycle commuters a tax free fringe benefit of up to $20 per month to cover the cost of pedaling to work including repairs, storage, accessories and even the cost of a bike. Employers and employees should act now to put this in place starting January 1st.

Also, the credit for residential energy saving improvements will return in 2009. The 10% tax credit has been expanded to include biomass fuel stoves as well. You may want to delay the installation of skylights, windows, outside doors and high-efficiency furnaces, water heaters and central a/c units until next year in order to claim the credit. This credit will be on the books through 2017 so you can use it in 2010 and beyond if you don’t get your project done next year.

One of the challenges for the alternative energy market is financing, and tax policies can make or break projects. Trying to determine long-term cash flows with unpredictable tax policies makes the challenge even harder so it is good news that many existing energy tax breaks have been extended:

• Coal and wind energy credits as well as the biodiesel credit have been extended through 2009.
• Energy credits for biomass and landfills lapse after 2010, as will a new credit for energy from waves and tides.
• The 30% solar energy and fuel cell credits however get a long-term extension through 2016. 
• The residential solar credit also lasts through 2016, and the $2,000 cap is repealed. 
• The law that allows commercial realty to expense energy saving improvements will run through 2013.

Credit Crunch tips

The professionals at Grant Thornton have released an excellent report providing guidance on how to survive the credit crunch.

The 36-page guide was a quick read and offered 10 practical steps to survival. It also gave a nice overview of the causes of the current crisis.

While most of the tips are simply good business practices, they become super important during a downturn.

A few of the important reminders:

1. Cash is King!!!
2. Get closer to your bank
3. Evaluate your customers and suppliers

The guide goes into additional detail. I recommend it for anyone with CFO responsibilities.

Local Banks Still Making Loans

I attended a Sustainable Business Network of Portland luncheon this week and the speakers were Dave Williams from Shorebank Pacific and Margo McCoy from Albina Community Bank. While they both talked about the causes and ramifications of the banking crisis (Insert macroeconomic lecture here), they also made it clear that their banks and many other banks had money to loan.

What has changed is some of the lending ratios (50-70% of equity rather than 90%) and collateral valuations. Due to declining asset values, firms that at one time borrowed 80% of an asset's value may actually be upside down due to market declines.

While there are problems with the banking industry and many banks have temporarily stopped loaning to each other, banks make money by making good loans and companies seeking funds shouldn’t give up. Having a solid banking relationship is important for every business both in good times and in bad.

I’m actually filling out a bank loan application today to buy some computer equipment for my new firm. I am hoping for a response early next week. I’ll keep you posted.

Sustainable money

Did you know that 45% of all bills in circulation are $1 bills and their average lifespan is 21 months? (wwww.http://www.moneyfactory.gov/document.cfm/18/2041). I believe these bills are made from a combination of linen, cotton and paper but I couldn't locate this exact information.

Compare that to the Life Cycle of $1 coins that the US Mint are now promoting (http://www.usmint.gov/mint_programs/$1coin/index.cfm). The average life of a coin is closer to 20 years and they are completely recyclable into new coins at the end of their life. This is a good example of closed loop manufacturing system. Not only is this good for the environment, but it is also good for the Treasury which hopes to save millions annually due to the durability and cost advantages of coins.

Like most ecological choices, the best option usually saves money and ecological resources when measured over time. I just picked up my first $25 roll of the coins and plan to begin using them as often as I can.