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Fwd: Re: How much $ do firms borrow for P2?
- Subject: Fwd: Re: How much $ do firms borrow for P2?
- From: firstname.lastname@example.org (Warren J. Weaver)
- Date: Tue, 7 Nov 2000 14:54:40 -0500
- Delivered-To: email@example.com
- Delivered-To: firstname.lastname@example.org
- List-Name: p2tech
- Reply-To: email@example.com (Warren J. Weaver)
Here's my two cents.
I work with an MEP Center (MANTEC, Inc.) that received a grant from an
endowment to establish a revolving loan fund for pollution prevention and
energy efficiency projects. We capped the loan amount at $50,000, capped
the percentage of the project covered by the loan, priced it at 2% under
prime (about 5 1/2% at the time) and had an application process developed.
It was aimed at small to mid-sized firms under 500 employees. After about 3
1/2 years of trying (although not very hard at the end), we finally gave up
and sent the money back to the endowment.
We found that $50,000 was too little to loan, the interest rate was not
attactive enough and the paperwork was too much of a hassle. We also found
that firms that thought our P2/E2 recommendations were good ones financed
the cost of implementation out of revenues when the implementation costs
were small (several $1000) or sub-divided the projects to about that level
and implemented all of the parts over time. (One firm took more than 3 1/2
years to complete a lighting upgrade using that approach.)
The argument the banker makes for not doing P2 projects in favor of
projects that increase sales doesn't fly with me however. Consider the fact
that few small firms have a profit margin of greater than 5%. Thus for a
firm with a 5% profit margin to increase sales by a dollar only increases
the bottom line by a nickel. So to add $500 to the bottom line, a firm has
to increase sales by $10,000. But a P2 project that saves a dollar adds a
dollar to the bottom line. Thus, a P2 project that adds $500 of profit is
equivalent to a project that adds $10,000 of revenue. Which do you presume
is easier to do? And which is cheaper?
I've made recommendations to firms that took no capital dollars to
implement. They only required procedural changes which enabled the firm
begin to realize savings-and increased profits-almost immediately. Using
this approach, a firm can become more cost competitive by doing P2 and
other cost saving projects and use the savings to finance expansion
projects to grow sales-or to be a better credit risk so the banker will
lend him $$$. (The banker should be paying us to help his clients so they
don't default on their business expansion loans!)
And on the other end of the spectrum, there was a large food processing
client of mine that spent $40,000 on P2 and reported first year savings of
$962,000. We were also told that we probably saved the 400+ jobs at the
plant because long term they could not have remained competitive had they
kept doing what they were doing. That project won me an "Outstanding
Project of the Year" award and helped win a governor's award for our
program. Interestingly enough, however, it wasn't our persuasive abilities
that caused the firm to implement our recommendations. It was the local
sewer authority hitting them over the head for exceeding their flow and
loading limits that finally caused them to take action-9 whole months after
the study was completed. Just think, they could have started saving nearly
$1 million annually almost a year sooner!
Keep the faith, techies. There's still plenty of work out there. Doing a
compliance audit for a firm will invariably uncover plenty of P2 /
sustainable business / clean manufacturing opportunities. Some will require
the large level of investment Burt discovered and others (the large
majority) can be done for little or no investment.
Warren J. Weaver
PO Box 5046
York, PA 17405
Certified ISO 14000 Auditor (#E051734)