Clint Gwin, president of Pathway Lending

Reducing energy usage can significantly reduce the cost of doing business.

Sounds good, but many companies feel overwhelmed and ill-equipped to make the often complicated – and sometimes costly – changes needed to redesign their energy consumption.

Three years ago, Tennessee became the first state in the country to develop a low-interest loan program to help companies finance energy reduction projects. The groundbreaking loans are designed to be repaid with the energy costs savings they create.

The loans cover a wide range of energy-saving projects – solar panels, new windows, efficient HVAC and geothermal systems, building retrofits, equipment replacements, new lighting systems and more.

The loan fund is a part of the Tennessee Energy Education Initiative, a public-private partnership that provides in-depth training and educational tools to businesses, public officials, and communities to support the implementation of energy efficiency, renewable energy, and energy management projects.

Nashville-based Pathway Lending coordinates and administers the loan fund. We asked Clint Gwin, president of Pathway Lending, to explain the history and impact of the program.

Q: Can you give a few examples of how companies have used these loans?

A: “(The) Energy Efficiency Loan Program is available to virtually any industry for virtually any energy efficiency project. Because energy demands vary so widely from industry to industry – and even then, from business to business – the completed projects are equally diverse.

“For example, Kline Swinney Associates, an architecture and design firm in downtown Nashville, installed more efficient lighting that also switches off when no one is in the room and automatically brightens or dims depending on how much sunlight is brought in through the light harvesting system. These changes, along with improved insulation, are the types of subtle projects most buildings can incorporate, regardless of industry or location.

“Kline Swinney is projected to save nearly $5,000 a year from these projects, which will save our air from the same amount of CO2 that would be produced by burning 2,700 gallons of gasoline.

“Projects can also be very specific to an industry. Holiday Inn World’s Fair Park in Knoxville purchased high-efficiency water heaters and clothes dryers for its housekeeping operations. It also replaced its parking garage lights with more efficient lighting.

“Combined, those projects save the hotel $45,000 a year and the equivalent CO2 as 34,000 gallons of gasoline.’’

Q: What are some characteristics of this program that have helped make it a national model?

A: “(It) is a national model in large part because of its flexibility. Pathway Lending created the Energy Efficiency Loan Program through collaboration with a number of partners – the state of Tennessee, the Tennessee Valley Authority, Pinnacle National Bank and others – that each brought its own expertise, influence and resources to the table.

“By consolidating the best each has to offer into one program, we are able to provide below-market rate loans that can finance up to 100 percent of an energy project, which was essentially unheard of at the time.

“But it’s more than the dollars and cents. Because Pathway Lending is a community development financial institution (CDFI), it has the flexibility to work with each applicant in order to determine not just which energy projects are desired, but which ones will best contribute to the applicant’s long-term stability and financial success.

Q: You recently lowered the interest rate for the Energy Efficiency Loan program from 5 percent to 2 percent. Who are you trying to reach with the loans?

A: “The new two percent interest rate is available on five-year loans to businesses that undertake energy projects that include energy-saving measures. Standalone renewable energy projects are eligible to receive ten-year loans at five percent interest.

“When considering energy projects, most first think of adding solar panels and other energy production – it is the more visually compelling piece of sustainable energy use. But often, more significant gains can be made with financial investments when focus is turned to projects that reduce energy needs.

“Pathway Lending reduced the interest rate to make energy reducing projects more financially beneficial to organizations – speeding up their return on investment – and to make energy projects of all types more accessible to organizations that couldn’t pursue them before.’’

Q: Is there an average loan amount?

A: “Loan amounts are tailored to the needs of each individual applicant and are available up to $5 million, but also are available for as little as $20,000. Since its launch, the program has provided $10 million in funding to more than 50 businesses across the state.’’

Q: How much money is available and where does it come from?

A: “The funds for the loan program came through a mix of public and private sources, including Pathway Lending’s own capital. The program is a rotating fund, meaning it won’t be permanently depleted.

“As a company repays its loan, the money is added back to the fund and is immediately available to a new applicant. The program will continually be invested and reinvested into Tennessee organizations, making the state more energy efficient as a whole.’’

Q: How does someone interested in the loan apply?

A: “To be eligible for a loan, a business must have an energy assessment or vendor proposal completed from which Pathway Lending develops the loan terms. To get the process started, suggested steps are listed at PathwayLending.org, as is full information on the loan process.’’

Q: Why is awareness about energy efficiency so important?

A: “Tennessee has some of the least energy efficient building stocks in the nation. With energy costs and environmental concerns on the rise, the lack of efficiency is beginning to bite back. Awareness and tools like the loan program give our state the potential to combat this and make massive gains.

“For businesses, the fantastic part of undertaking energy efficiency projects is that the financial savings generated offset financing costs, putting little or no strain on budgets. It is estimated that every dollar spent on energy efficiency creates $2.84 in benefits over the life of the installed measures, a 184 percent return on investment. Once the project is repaid, that savings bolsters budgets and can be reinvested into the business and permanent jobs.

“Energy efficiency projects create and retain jobs in the short term as well because trained contractors, consultants and installers are needed for project implementation. Energy efficiency can be a nebulous idea and only by exploring how it will work within your business will its full potential be realized.’’