An infusion of new capital will allow these firms to scale up, lower costs, and improve delivery chains
President-elect Barack Obama's top priority is an economic stimulus plan he can sign into law soon after taking office. He's calling for "a plan big enough to meet the challenges we face."
We hope it's also a plan that is small enough to meet these challenges—a plan that revs up the engine of our economy: America's 27 million small businesses. These small firms produce half of the gross domestic product, employ half of the private-sector workforce, and create 60% to 80% of all net new jobs, according to the Small Business Administration.
If Obama's economic stimulus plan is to succeed, clearly it must include a sharp focus on job creation by small businesses. The President-elect has also declared that "a new energy economy" is going to be a top priority when he takes office. Most clean tech companies are startups and, hence, small. For example, over 70% of renewable fuel producers are small firms, according to the U.S. House Committee on Small Business.
Giving Small Biz A Green Light
As it is, such companies are trying to scale up, lower costs, and improve delivery chains to their customer base. An infusion of new capital will enable them to meet market demand that is already growing. Here's how this could happen—and fast, too.
Numerous federal programs are authorized to assist small businesses in one way or another. These programs are up and running; they are funded. The economic stimulus plan should assign a green priority to these programs, and the new Administration should see to the implementation of this priority throughout the federal government.
For example, small business energy efficiency and renewable energy projects qualify for the 7(a) Loan Guaranty Program administered by the SBA. These loans can be used for construction, renovation, and acquisition of machinery and equipment. This means that eligible small businesses can use 7(a) loans to purchase energy-efficient equipment or to make their facilities more energy efficient. The problem is that the SBA does almost nothing to promote 7(a) loans for these purposes. New leadership at the SBA should make this a priority.
Tapping Federal Programs and State Grants
Other federal small business programs that could be mobilized to stimulate the economy include the Agriculture Dept.'s Rural Utility Service and Farmers Home Loan Administration loans, the Energy Dept.'s loan guarantees, the Homeland Security Dept. state grants, the Environmental Protection Agency's EnergyStar programs, the Energy Dept./EPA state grants, and the Labor Dept.'s Workforce Innovation in Regional Economic Development initiative.
Specifically, the economic stimulus plan should:
1. Instruct the previously mentioned programs to prioritize clean tech companies.
2. Prioritize projects that reduce small business energy costs through increased efficiency. EPA's EnergyStar Small Business program, for example, has documented how voluntary action by small business owners can reduce energy costs by 30% or more. But EnergyStar, the parent program, spends only about 1% of its $50 million budget on small business, even though the sector makes up half of the economy. EnergyStar's resources should be reallocated to greatly increase technical assistance to small business owners.
3. Prioritize projects that facilitate small business use of renewable energy and micropower technologies. Small business owners have no better way to get reliable energy than from installing micropower devices—small, modular devices that generate renewable power on a small scale for use on-site (such as roof-top solar panels and small wind turbines). There's an affinity here: Because both the size of the enterprise and the scale of the technology are small, they fit together, hand in glove. Solar water heaters, for example, are particularly suitable for cafeterias and laundries. Such technologies often make economic sense for small firms.
The point of this government-wide strategy, as we see it, is to make capital available to both small business producers and small business consumers of clean technologies. This infusion will help close a lot of deals, particularly if new capital enables clean tech companies to drive down costs. New jobs will flow from these transactions in abundance.
The country needs these jobs desperately, so speed is of the essence. For their part, small businesses are renowned for their speed and flexibility. They can turn around on a dime. But what about government? Since the measures proposed here do not require new laws, new appropriations, or new programs, here's one instance when government might be able to act swiftly too. The sooner, the better!