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What Are Green Loans?

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  • Written By: Pablo Garcia
  • Edited By: O. Wallace
  • Last Modified Date: 15 September 2016
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Green loans are specifically for assisting small businesses and individuals in starting or expanding eco-friendly products or services. They are also available to existing businesses that want to “go green” and have a positive impact on the environment. Green loans are available from commercial lenders and through “peer lending” from groups of private individuals.

Projects qualifying for green loans include recycling, composting, community gardens, and janitorial uses for eco-friendly products. The loans can also be used for home remodeling, roofing, solar panels and windows. Green landscaping, which uses native plants in dry climates rather than importing other plants also qualifies. The use of native plants saves on water consumption.

In peer lending, sometimes called peer to peer lending, funds for green loans come from individual investors. There is a fixed rate of interest on loans to individuals. The loan can be in a large amount from one person or comprised of small amounts from hundreds of people. Although credit history is a factor in loan determinations, peer lending is more flexible than traditional lending.

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Green grants are available from a variety of organizations and US government agencies. For instance, the Environmental Protection Agency (EPA) offers grants for environmental education and watershed projects. Green grants are also available in the areas of housing, research, construction and energy. Growing awareness of the need of green business practices has led to the creation of many sources for green business grants. Organizations also provide grants for eco-friendly school supplies and after-school environmental programs for young children.

With increasing concerns about global fuel consumption and car emissions, government energy departments around the world have offered billions of dollars in subsidies to car manufacturers to prepare and market fuel efficient cars as quickly as possible. In the US, the Government is sponsoring an eco-auto rebate program. Go green car loans and “fuel smart” auto loans are also available from lenders. There are also tax rebates and finance incentives associated with green car and smart fuel car purchases.

The World Bank launched a green bonds initiative to support low carbon activities. Green bonds can be packaged and sold to secondary markets, pension funds, institutional investors and individuals. The Coalition for a Green Bank is an ad hoc group advocating for creation of a US agency that would provide financing to support projects involving clean energy and energy efficiency. The group believes such a bank could be capitalized by green bonds created by the Department of Treasury.

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