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Re: How much $ do firms borrow for P2?





Burt,

I am surprised that you are surprised. We know from experience that P2
solutions come in a continuum of costs, so I would guess that the figures
you are looking at indicate that there is a threshold of value of the loan
to the firm which must equal or exceed the administrative cost of applying
for it, below which it is easier and actually cost-effective to
self-finance. Moreover, though you don't comment on the size of firms
applying, I would expect a high correlation between size of firm and size
of investment, and that SMEs are less aware of the program and culturally
less likely to consider applying at all, even if aware.

Richard

At 06:42 PM 11/5/00 -0800, Burt Hamner wrote:
 >Hi P2 techsters and ONE-L folks
 >Bill Narotski of the Ohio EPA was kind to send me details of their Pollution
 >Prevention Loan Program.  I have analyzed the loans they made to firms for
 >various P2 process improvements.  The doc I got reports 27 loans made.  They
 >were real process/tech improvements and not pollution control.  The average
 >amt was  $175,112, the median amt was  $150,000, min =  $25,050, max =
 >$350,000.  The doc does not report the total investment by the firms, just
 >the amount they borrowed.  It is reasonable to assume that firms probably
 >put in additional funds or in-kind labor to make these work, so I think it
 >is reasonable to assume that the average P2 investment is closer to
 >$200,000.
 >
 >This is a surprise to me.  I thought there would be more firms looking for
 >smaller loans.  Question:  Do P2 techsters think there is demand for smaller
 >loans and the demand is not being met?  Or, are smaller loans being
 >requested by small firms that don't really qualify as good borrowers, so
 >they don't get funded? (I think that is often likely).  Or, do firms have to
 >be of a certain size and capacity to take advantage of specialized loan
 >programs (also likely).  Perhaps the nature of P2 process/technology
 >improvements is such that they really do require a significant chunk of
 >capital?  Sure, we like to say that there is a lot of low hanging fruit
 >etc., but if firms commonly have to spend over a hundred thousand dollars to
 >make P2 improvements, well hell, my grandpa would say, no wonder that dog
 >won't hunt...
 >
 >Honestly, I don't know what these numbers represent, but they sure do raise
 >some interesting questions about the financial thresholds firms must face
 >when moving towards P2.  I am interested to hear from you in the field about
 >what kinds of capital needs your P2 clients face, and what they do when they
 >are smaller and the projects are smaller.  I guess I am saying that the P2
 >challenge out there does not really seem to be in the firms that are capable
 >of handling a $200,000 loan; certainly in many parts of the world you are a
 >success already if you can even think about that kind of investment.  Is the
 >Ohio lending experience typical of P2 investments, if so what does that mean
 >for P2 promotional strategy?
 >
 >I am producing a massive paper on P2 financing and will be happy to include
 >any feedback you can give in it, with appropriate credits, and share the
 >results with you if you are interested.  I hope we can get a little dialog
 >about this going on P2TECH.
 >**************************************
 >Burton Hamner
 >Hamner and Assocaties LLC
 >5534 30th Avenue NE
 >Seattle WA 98105  USA
 >Tel:  206-526-5308
 >Fax: 208-279-4991
 >Email:  bhamner@cleanerproduction.com
 >Web:  www.cleanerproduction.com
 >*****************************


Richard S. Stevenson
______________________
27126 Wapiti Drive
Evergreen, Colorado
80439 USA

Tel.:  1-303-679-0093
Fax:  1-303-679-0197
e-mail: richard.stevenson@att.net