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Re: How much $ do firms borrow for P2?.



Demonstrating once again that she is capable of predicting the future, the
latest issue of Ginger Griffin's P2 Review which came in my mail today has
cover story, Promoting P2 Through State Loan Programs.  Article is more of a
survey of mechanisms that a discussion of why or why not firms borrow, but
it is rather timely, eh?  Who did you predict would be president tomorrow,
Ginger?  You have to answer in next ten seconds :-).

Also worth note:  the journal Greener Management International
(www.greenleaf-publishing.com), v 27:1999, theme is Sustainable Banking: The
Greening of Finance.  Mostly covers European examples.  Article, The Growth
and Environment Scheme:  The EU , the Financial Sector, and SMEs as Partners
in Promoting Sustainability, describes the EU loan guarantee fund for small
biz (under 100 employees) who can get a 50% loan guarantee for P2 and
pollution control financing.  It reports that over 1,400 firms have
benefited from total investments of EC 525 million.  Ahem, I guess that is
about 1,300 more firms than have borrowed from all the dedicated P2 loan
programs combined.  The basis of the scheme is strong partnerships with key
regional banks, one or two per country (selectivity in partnerships is
good); focus on risk reduction for lenders (guarantees are good); low
overhead (guarantees are contingent liabilities, since you don't have to
actually lend money, you can have a very small staff that basically handles
portfolio insurance); plus fact that Europeans are generally being more
aggressive about greening business than the US is.

I spoke to the single(1) environmental person at the US Small Biz Admin Loan
Guarantee program about their Pollution Control Loan Guarantee program.  It
simply increases the cap of the standard guarantee amount by 25% if the
project is for pollution control.  He says they make about 40,000 guarantees
a year.  They make, in his estimate (no real data because their system does
not code it right) about 2 or 3 pollution related guarantees a year.  Oops.
He says it is basically a puff piece, probably more firms use the guarantees
but they dont' report them as being for pollution control because of course
that makes their bankers nervous!

Loan guarantees are a very attractive option for encouraging financing, so
are capital access programs (basically a kind of subsidized portfolio
insurance for lenders) because you don't have to put up the capital up
front.

None of this has to do with why firms will or won't borrow in the first
place but it has a lot to do with whether lenders have useful mechanisms to
reduce their risk when lending, especially to smaller firms that might just
generally have a hard time getting financing.

i am listening to the Grateful Dead and thinking about banking policy, there
must be a full moon or an election going on somewhere...

Burt