Financing Energy Efficiency Upgrades
(The final installment of a three-part series. In the first installment of this series, we highlight the benefits of becoming more environmentally friendly and examine ways to analyze small business energy usage. Part two addresses no-cost and low-cost energy and money saving steps. In the final part of our series, we share tips for calculating the return on investment and financing major energy upgrade initiatives.)
It’s easy to blame large corporations for much of today’s environmental problems. However, many people are surprised to learn that small businesses have the ability to prevent as much pollution, per square foot, as large corporations—and simultaneously cut utility costs.
The nation’s small businesses spend more than $60 billion on energy each year. Thanks to advances in technology and a proliferation of energy efficient products and appliances, small businesses that invest strategically can dramatically reduce utility costs without sacrificing service, quality, style or comfort. Depending on your utility’s fuel source, for each kilowatt-hour (kWh) that you save through energy efficiency technologies, you reduce greenhouse gas emissions, which cause global warming, acid rain, and smog. Individual savings vary depending on a number of factors including local energy rates, type of facility, hours of operation and level of business activity.
In part two of this series, we covered no-cost steps and inexpensive, off-the-shelf products you can use to increase energy efficiency. However, if a small business decides to do a major energy efficiency upgrade that requires a large capital investment, say by replacing refrigeration equipment, or upgrading heating, ventilating and air-conditioning systems (HVACs), outside financing is often needed.
While these energy upgrades can be costly they may well be beneficial to the environment and your bottom-line. For example, the average restaurant typically spends approximately 2 percent of its revenue on energy. Approximately 4 percent of revenue is profit. So if a business owner reduces energy cost by 25 percent (from 2 to 1.5 percent), total bottom-line profit increases from 4 percent to 4.5 percent of revenue. This increase in profit is the same as a 12.5 percent increase in sales.
