These 5 Bank-Endorsed Best Practices Can Help Safeguard Your Investment in A New Book of Business.

Buying an insurance agency can be a great way to accelerate your growth. However, it’s a purchase that is inherently risky. Learn how to make the most of buying a book of business to grow your insurance agency with these bank-recommended best practices.

1.      Research Your Potential Customer

Buying an insurance agency is only worth the investment if you retain most of the new agency’s clients. Retention rates are heavily dependent on client experience, an aspect that should be a top priority during your insurance agency acquisition.

Lay the groundwork for a smooth transition by getting to know your client outside of just their demographic stats. What is the value proposition that brought them to this agency? Are there personal relationships between clients and the owner that you need to be particularly respectful of? The better you understand your clients, the better your chances of delivering a client experience that exceeds their expectations. Happy customers lead to capturing the highest potential gains from the purchase.

Additionally, research the customer base to determine how they fit into your long-term growth strategies. Do you have a highly scalable business model that is ready to roll out? You may want to buy an insurance agency book of business with a similar customer profile to your existing customer. Is your goal to diversify your agency’s customer demographics? Check that the insurance agency book you plan to buy will complement your current base. Be strategic when buying a book of business for customer acquisition to maximize your investment.

2.      Create a Communication Plan to Announce the Acquisition

The announcement of the business purchase is one of the most crucial aspects in determining the success of an acquisition. A comprehensive communication plan can help you make the all-important first impression with your new clients and colleagues.

Plan an acquisition announcement that is clear, direct, and appropriate for every party involved. The way you discuss the transition of the business with existing employees needs to be different than how you share the news with clients. The key to all your communication surrounding the acquisition is to keep it direct and frequent. Transparency throughout the process can help establish trust in new ownership, mitigate fear surrounding a transition, and improve the outlook for everyone involved.

Your communication plan may include the following pieces:

• Internal Announcement (if applicable)
• Email Announcement to Existing Clients
• Email Announcement to New Clients
• Public Announcement
• Client Follow Up
• Personal Client Meetings (if applicable)

With a proactive approach, your announcement plan may help you retain even more value in the book of business after the sale.  Do everything in your power to ensure the announcement is rolled out in a way that builds trust in your growing business.

3.      Understand How the Book of Business Cost was Calculated

How do you know a fair price for a book of business? An appraiser would look at key factors like earnings, profit margins, retention rates, and an industry’s economic outlook to determine how much an insurance agency for sale is worth.

Two of the big characteristics we recommend looking at to determine the cost of an insurance agency are:

• Cash Flow and Expected Earnings

Look at the cash flow of recent years to determine what kind of revenue you’d expect this book to bring to your business. Keep in mind that spending behavior in recent years may have been volatile due to pandemic related disruptions. Yearly statements may contain outlier data that skews, positively or negatively, the revenue statements for the business. You may want to ask the seller for monthly breakdowns of profit/loss statements to annualize months with data that displays less volatility to get a better picture of typical cash flow.

• Comparable Sales in Your Area.

Valuations often account for recent industry performance and expectations using a standard multiple. Compare the price of the agency you’re interested in with recent sales in your area, or similar locations. Does the price accurately reflect the current state of the industry?

Understanding the valuation process gives you greater insight into this company’s true value as it pertains to your business goals. Even if you work with a third-party appraiser, you should understand the factors used to determine the listing price. Ask for specific cost breakdowns when necessary to better analyze if the price is right for your investment goals.

4.      Secure Financing That Keeps Cash Flows Strong

A business acquisition can severely restrict your cash flow if you’re not prepared with the right financing options. We advise against deal structures that leave you with crippling or constricting debt. However, you may be able to secure financing that helps you fund the purchase with loan terms that still allow for your business to grow.

We often recommend SBA loans for insurance agency acquisitions because of the following terms:

• Extended Repayment Terms

Extended repayment terms spread out payments over a longer period. This results in lower monthly payments, so there’s more cash to reinvest in the business each month while you pay off the debt.

• Competitive Interest Rates

With interest rates in flux, the cost of borrowing runs the risk of being even more expensive. We often recommend SBA loans to eligible borrowers because the interest is based on WSJ prime, keeping payments realistic based on current economic conditions.

• Flexible Collateral Requirements

Buying a book of business is not a purchase that includes large amounts of physical collateral. The value is mostly intangible. This can be a barrier to securing a conventional business loan since banks typically require these loans to be fully collateralized.  With SBA loans, you could still be eligible to borrow large amounts (up to $5 million) even if your business model operates without many assets.

These qualities make SBA loans highly sought after for entrepreneurs that need to finance a business acquisition while improving cash flows. Buying a book of business that you could finance with a business-friendly loan like this one can help you maximize the opportunities in the initial investment.

5.      Work With the Seller Throughout the Insurance Agency Transition

An involved seller transition puts the seller in a position to advocate on your behalf to their clients. It may increase the purchase price of the book of business, but seller involvement could be well worth the money spent if it means better client retention rates and an improved outlook on your management.

You’ll typically meet with the seller before the acquisition to discuss your company culture, your management style, and your philosophy on client experience. The seller probably has a clear understanding of why you’ll be a good fit for their book of business. Their clients do not.

An involved seller will help walk clients through their transition to your leadership. They’ll get the news from a trusted partner to whom they feel loyalty. The seller increases the value of their book of business by improving retention rates. And you, the buyer, maximize the potential return on your investment.

Buying an insurance agency can be a great way to grow your agency quickly and efficiently if you’re making the most of the investment. These best practices should set you on the path to buying a book that’s worth the return on investment.

Pre-Qualify for an SBA Loan for Business Acquisitions in Just Minutes:

About Capital Bank: A financing partner should reciprocate the level of trust you’ve built around your practice. With a 100-year+ community banking history, Capital Bank works with entrepreneurs across the US to grow their businesses with proven financial solutions.

Buying a book of business to grow your existing practice is a big leap for your financial practice. It’s not just a way to scale. When you buy a book of business from another financial advisor you purchase their customers’ dedication, trust, and loyalty. It puts you in a unique position to balance your practice’s growth while catering to an entirely new set of customers’ unique financial needs. But an acquisition also comes with financial and intangible risks to your existing practice.

The right business acquisition will put your financial practice in a position to onboard new clients efficiently and effectively. But how do you know if you should buy a book of business: is it the right fit for your customer management style? Will the clients want to stay with your practice? Is your practice ready to intake customers? Are you paying the right price for the book?

Ask yourself these 5 questions before you buy a financial advisor book of business to grow your practice.

1.      Is There Client Synergy?

Buying a book of business from another financial advisor is only a successful growth tactic if you can successfully retain customers after the merger. Synergy between your book of business and a new book could help reduce the risk of customer defection. Clients from the book you’re buying will be more likely to understand your value, processes, and business model if there’s synergy between the practices. Synergy indicates a higher likelihood that they’ll stay.

This is especially true for advisors that specialize in the growing sector of ESG and/or impact investing. Clients of these practices often select a mission-driven financial practice that shares their philosophies and values. If your practice doesn’t align, retaining new clients may be an uphill battle.

Synergy should also be discussed in the context of account management between the books. Examine the processes used to manage both financial practice books of business. How does your client management align with the financial practice you’re purchasing?

Consider a loyal client from the new book that’s been with their advisor for the last 15 years. They may be accustomed to a certain level of communication, service, and client-facing interaction. If you can’t offer that at this time, you jeopardize their loyalty and trust in you, their new advisor. It may be more difficult to retain them if you need to introduce a new style of communication, investment management, and service.

Ask yourself if your processes could be extended to new customers as they currently exist. If you would you need to make substantial investments to change your processes for onboarding and managing the new book of business, consider purchasing a more closely aligned practice.

2.      How Was the Book of Business Valuation Calculated?

When deciding how much a book of business is worth, appraisers often calculate a purchase price using a standard multiple for the yearly revenue of the book. However, current valuations rely on data from the most recent years. And our most recent years are not necessarily indicators of long-term performance because of outlier behavior and data.

Decide how much you should pay for a book of business based on the most accurate projections available. Try to obtain monthly breakdowns for years that exhibited ‘outlier’ behaviors like those induced by the pandemic. Annualize ‘normal’ months instead of taking yearly data at face value to get a more accurate idea of how much a book of business is worth in 2022, onward. This method should help you gauge long-term revenue potential over stabler conditions.

Certain intangible qualities of the book, like client goodwill, are also harder to value. When determining how much you should pay for the book of business based on goodwill, you may want to consider turn over rates, client retention rates, and cross-sell rates (how often did a customer elect for additional services after their base service). These are all statistics that indicate the book of business is full of ideal customers with healthy spending behavior for your practice.

If the numbers are healthy, it should be reflected in the business valuation. Be wary of valuations that inflate the value of client loyalty if these key performance indicators say otherwise.

3.      Will the Seller Help Transition the Book of Business to Your Financial Practice?

Seller involvement can be a crucial element of client retention during a transition of business ownership. A seller that stays involved after the purchase bolsters the chances that the book retains its purchase price value.

An involved seller will help walk clients through their transition to your leadership. They’ll get the news from a trusted partner to whom they feel loyalty. The seller increases the value of their book of business by improving retention rates. And you, the buyer, maximize the potential return on your investment.

You should account for the benefits of a highly involved seller when determining how much you are willing to pay for a book of business. Though the purchase price will be higher, you may have a much better chance of a higher return on investment than if the seller walked away as soon as you sign the dotted line.

Before you buy a book of business be sure to inquire about the level to which the seller is willing to advocate for your leadership to their roster of clients.

4.      Are You Using the Business Acquisition to Pivot Your Revenue Model?

Some advisors transition their business from a commission-based model to a fee-based practice by buying a new book of business from an existing fee-based advisor. This type of acquisition accelerates your jump into fee-based planning as opposed to gradually transitioning an existing book over a long period of time. However, if you’re planning to buy a book to accelerate a transition to fee-based planning make sure you lay the groundwork first.

There are a couple of things you’ll need to do in your own practice to prepare for a transition that pivots your business model. The most important, if not the most obvious: make sure you’re registered as a fee-based advisor in time to onboard the new accounts. The book is only valuable to you if it’s a client base you’re allowed to service. Perform your due diligence to make sure you’re acting compliantly based on what you’re legally allowed to offer.

Secondly, prepare your existing audience for the change in their services. Before making the announcement, tailor communications to explain what their new fee structure will cost, why it’s better for their account management, and what they can expect from you moving forward. Communicate clearly and often to help both your existing client base and your new book of business feel confident in your value as their new advisor.

5.      Do You Need to Finance Buying a Book of Business?

You may need to finance your acquisition of the practice, depending on how much the book of business costs. If the sale of the book of business is time sensitive, make sure you come prepared with financing options that you can move quickly on. Putting a financing plan in place before the negotiations start helps you become a more competitive buyer that can strike while the iron is hot.

Not all business acquisition loans are alike. We recommend looking for a loan that offers long-term, patient capital.

Our recommendation for buying a book of business is often the SBA 7(a) loan. This loan program can be great for acquisitions because of its 10-year repayment term (30 years if real estate is involved), fully amortizing terms, and competitive interest rates. Financial advisors are especially a good fit because of the flexible collateral requirements of the 7(a) Loan Program. Though valuable, a book of business is priced for its intangible worth. It’s not something a bank can collateralize. The SBA loan makes it possible to secure competitive financing for the purchase even if other comparable business loans are off the table.

However, you’ll want to prepare for financing in advance if you plan to utilize the 7(a) program most efficiently. The SBA 7(a) loan application is detailed and document-heavy. You’ll need to approach the table ready to move quickly with your lender if want to use an SBA loan to buy a book of business.

Pre-Qualify for a business acquisition loan from Capital Bank online to get ahead of the process. Our Director of Financial Advisory Lending will reach out to discuss your business goals and loan options in more detail to give you a jump start on the financing process.

Pre-Qualify for an SBA Loan for Business Acquisitions in Just Minutes:

About Capital Bank: A financing partner should reciprocate the level of trust you’ve built around your practice. With a 100-year+ community banking history, Capital Bank works with entrepreneurs across the US to grow their businesses with proven financial solutions.

Franchises must be listed on the SBA Franchise Directory to be eligible for an SBA franchise loan. Here’s how to submit yours for consideration.

Plan on buying a franchise using an SBA loan? You’ll first need to make sure the business is listed on the SBA Franchise Directory. The SBA requires franchises to be included on this list of businesses in order to be eligible for their entrepreneur-friendly loan programs.

Understanding SBA Franchise Directory Requirements for SBA Franchise Loans

Many new owners choose to buy a franchise with SBA loans because of the unique loan benefits. SBA franchise financing opens the door to affordable capital with longer terms and flexibility in how the funds can be used.

However, not every franchise makes the cut for the small business loan programs.

The SBA wants to support businesses that put revenue back in local entrepreneurs’ hands. Franchises may seem like an unusual candidate for their loan programs, but they may still be eligible.

The SBA assesses a business’s loan eligibility based on how much autonomy they give the franchisee.  Franchise agreements must let the franchisee operate as independent business owners within the framework of the franchise rules to qualify for SBA franchise loans.

If they’re deemed eligible, the franchise is added to the official SBA Franchise Directory. Entrepreneurs who own a franchise on the Directory can then apply for financing through SBA loan programs.

Step 1: Check to see if the franchise is already listed.

Before submitting a franchise, check to make sure it hasn’t already been approved by the Small Business Administration. If your franchise name is on this list, it is eligible for SBA financing. The Directory will also list if the franchise will require additional documentation or limitations on SBA loan options based on the agreement type.

You can check the SBA Franchise Directory Here. Simply search the franchise name that you’re interested in financing with SBA loans. If it’s on the list, it’s eligible. You can skip the following steps and proceed with your SBA franchise financing application.

Step 2: Gather the required documents.

The SBA lists out a few sets of documents they need to determine a franchise’s financing eligibility:

• Completed copies of the franchise/license/dealer/jobber or similar agreement for the brand

• The Franchise Disclosure Document

• Any other documents that the SBA would need to sign for the franchise

Existing franchise owners that need an SBA loan for working capital or specific project uses probably already have access to these documents. If you are buying a franchise, work with the seller and the franchise to find these documents.

Step 3: Send your franchise to the SBA.

Once you’ve gathered your documents, it’s time to send them to the SBA for review. Email the documents to [email protected] with your request for inclusion in the Directory.

If you want to get ahead with the remainder of your application while their decision is pending, continue assembling the remainder of your application. You can learn all about the process for securing an SBA loan to buy a franchise with our online Franchise Financing Guide.

Step 4: Receive SBA Franchise Directory decision.

The Directory is updated weekly by the SBA, but it can take up to three months to process any franchise submissions. Potential franchisees are welcome to submit at any time, but keep the SBA’s time frame in mind. Prioritize submitting to the Directory early on if your SBA loan is time sensitive.

Step 5: Apply for SBA franchise financing.

A franchise that’s listed in the Directory is eligible for financing, fully or provisionally. Occasionally, certain franchise agreements will require additional documentation to secure an SBA loan. The SBA will include any of these stipulations in the Directory.  Work with your lender to understand any additional provisions your franchise needs to meet.

Once your franchise is on the Directory, you’re free to move forward with your SBA loan. Get started with your SBA franchise loan here.

Why Use SBA Franchise Loans for Franchise Financing

Franchises can be expensive from the onset. Buying a franchise typically requires a franchise fee, the purchase or lease of property, inventory or equipment purchases, staffing expenses, and marketing costs. Once you own the franchise, royalty fees and miscellaneous expenses kick in.

An SBA loan gives entrepreneurs a few key advantages:

• The flexibility to use loan proceeds the way they need to. SBA loans remove some of the limits on eligible uses of the loans to help support more entrepreneurs’ diverse needs.

• Longer annuities. SBA loans typically come with 10 or 25 year terms, longer than most conventional loans. Longer terms spread out payments, so entrepreneurs may operate with greater cash flows month to month.

• Interest rates set by the SBA. The Small Business Administration sets a baseline interest rate for SBA loan programs to keep the loans competitive in the current economic climate.

Have questions about your eligibilty for SBA franchise financing your franchise? Submit the form below to speak with a lender about your options for franchise financing.

Check Your SBA Franchise Loan Eligibility:

Prepare these documents to get ready for your FedEx SBA loan application.

Using SBA loans to buy a FedEx Route could be a good option for entrepreneurs who want longer-term, business-friendly loans to finance their purchase.

SBA loans typically have less strict collateral requirements than conventional business loans. They can be a good fit for the FedEx route business model since route ownership is not a business that requires an excessive amount of assets that can be counted as collateral.

FedEx route owners also tend to appreciate that the longer terms of SBA loans result in smaller monthly payments. That’s more capital to invest in the business month to month, without paying a premium on your interest rate.

One drawback of SBA loans is that they do require more paperwork than conventional loans and a longer timeline for funding. It’s a trade-off for securing a government-guaranteed loan’s great benefits.

Starting your documentation collection early can help expedite the process and keep it manageable.

Focus on preparing these 5 documents to get ready for an efficient loan application.

1.      Business Plan with Resume

Your Business Plan is one of the first documents a lender will look at when determining your loan eligibility. If you want to make the best first impression and help organize yourself for success throughout the application process, make sure your Business Plan is top-notch by using our business plan resources in this article.  

Get started by downloading our free business plan template for SBA loan applications. Tailor it to address a few key details lenders need to see to determine your SBA loan eligibility.

First, address your transition plan for the business. Buying a FedEx route is viewed as a business acquisition. You’ll need to provide details about the transition of ownership to help your lender understand how you plan to manage the route once it’s yours. Identify the exact route you wish to purchase in your business plan, if possible.

SBA loan applications also require you to detail your management experience in your Business Plan. The SBA loan program is not intended to support businesses that are passively managed, so lenders will want to see applicable operational and managerial experience from prospective borrowers.

Include any management experience you or your team members have in this industry, or others. You can include experience in logistics, staffing and recruitment, management of teams or finances, etc.

The official Request For Information (RFI) you’re required to send to FedEx will include a lot of the information you’ll need to add to your FedEx route business plan for an SBA loan application. Keep it on hand to help you write your Business Plan.

2.    Financial Projections for the FedEx Route with Written Assumptions

Lenders want to see how the business will grow under the new ownership. The Financial Projections are a prediction of how much money you’ll bring in each month, how much you’ll spend each month, and the profit you turn based on both factors.

You’ll need three (3) years of financial projections. Break down your first year of the business month by month. The other two years can be annualized projections. All 3 years will need to have written assumptions discussing future revenues and expenses you provide in the projections.

Lenders will look for these explanations of your calculations written out as ‘assumptions’. This part is particularly important for SBA loan applications. You’ll need to explain how you’re determining hypothetical numbers to use in calculations so that your SBA lender can help make sure the projections are reasonable.

3.       Business Tax Returns (for both the Buyer and the Seller)

You should prepare to submit 3 prior years of Business Tax Returns for both yourself and the person selling their FedEx Route(s).

Business Tax Returns are required by the SBA. Any lender that you would use to finance buying a FedEx Route should ask for a copy of 3 years, including all schedules. If you don’t already have them on hand, you’ll want to collect them when you prepare to buy a FedEx route.

Be sure to collect 3 years of returns from the seller and have 3 years of personal returns ready to provide to your lender. If you own existing businesses, you’ll need to provide 3 years of tax returns for those entities as well. Year-end financial statements will not suffice as most lenders underwrite to the tax returns.

4.      Interim Business Financial Statements

To assess the current operations of the selling entity, your lender will ask for Interim Business Financial Statements from the seller, in addition to the tax returns.

Interim Business Financial Statements consist of the year-to-date profit and loss statement, balance sheet, and debt schedule (it is important to understand if any of the vehicles have outstanding debts). They’re used to help gauge the most up-to-date performance of the FedEx route business throughout the current year.

Work with the seller of the FedEx route to assemble the interim business financial statements. You’ll need to include an income statement, balance sheet, and debt schedule for the year to date.  

5.      Personal Financial Statements

Prepare your own personal financial statement. This should include your assets, debts, and income outside of the FedEx business.

The personal financial statement helps your lender understand your financial strength and which financing options are available. This is an especially important document for business acquisitions and startup businesses since the overall strength of the owner is a larger part of the credit analysis, compared to analyzing an existing business with a demonstrated track record.

Other Documents You’ll Need to Finance a FedEx Route with SBA Loans:

Affiliate Financials

The SBA requires statements for all the businesses in which you own 50% or more. You will be required to provide the affiliate financials for these businesses, which includes the business returns, financial statements, and debt schedules for those businesses in addition to the statements for the FedEx route acquisition.

Part of the SBA loan eligibility criteria is a ‘credit elsewhere’ test. By requiring the financials for all your affiliated businesses, the SBA can assess your ability to secure financing through a conventional loan option. This helps them determine whether or not their small business loan is a good fit for you based on your business portfolio.

Streamline your SBA loan application by compiling your affiliate financials alongside your other financial statements.

Letter of Intent or Draft Purchase Agreement (with Exhibits)

If you plan to utilize seller financing to purchase a FedEx route, provide your lender with a Letter of Intent (LOI) or a draft Purchase Agreement (PSA) with exhibits between you and the seller of the route.

Seller financing is a financing option in which the seller works with your lender to finance part of the down payment for the FedEx route purchase. The seller absorbs some of the risks of the sale, so they’re incentivized to see you succeed because their money is on the line, too. As a buyer, seller financing should signal confidence in the route from someone that’s worked it before.

You don’t need seller financing to secure an SBA loan to buy a FedEx route. However, seller notes either on full standby or normal repayment terms are often favorably viewed by lender’s credit teams.

An LOI or PSA are both great documents to give your potential lender to keep the financing process efficient. Both documents provide many of the details your lender will need to structure your financing package. By submitting one of these documents with your application, you’ll provide a a quick reference on the purchase terms, non-solicit/non-compete, seller and buyer’s disclosures, details on any seller note(s), and any contingent items.  

Get Ready to Buy a FedEx Route with Affordable Financing

Whether you’re still researching FedEx routes for sale or getting ready to apply for an SBA loan, we hope to be your financing resource throughout the entire process. Check your eligibility for FedEx route financing options by completing the form below:

Capital Bank is not endorsed by and is not recommended by Federal Express Corporation and FedEx Ground. Capital Bank is not sponsored by, is not approved by, is not associated with, and has no connection with Federal Express Corporation or FedEx Ground.

On-site anaerobic digesters are helping feedstock operators throughout the U.S. become more sustainable and more profitable. Learn about the investment that’s helping operators introduce green initiatives without compromising their bottom line.

The Problem: A Need for Profitable Sustainability Initiatives

The business world is responding to the climate crisis by adopting new levels of social and environmental responsibility. An increasing amount of evidence points to human activity as the root cause of increased greenhouse gas concentrations that continue to harm our planet. In turn, institutions are more motivated than ever to improve their sustainability record.

From major corporations like Dell implementing safe disposal programs to local small businesses using renewable energy to run their dry cleaning services, sustainable business practices are becoming the new norm.  And in some cases, these activities are imperative.  At least 17 states have mandated a 100% renewables or zero-emission electricity supplies policy by a certain date.  In addition, California requires “obligated parties”, such as oil refiners and diesel providers, to purchase Low Carbon Fuel Standard (LCFS) credit offsets or be forced to pay fines.

However, “going green” can be difficult to navigate with various forms of renewable energy sources available (wind, hydropower, solar, biomass, and geothermal), all of which require new, complex, and expensive technologies to harness.  That’s where anaerobic digestion comes into play

The Solution: On-Site Anaerobic Digesters

Anaerobic digesters turn bio-waste into clean, efficient energy that can be used to power an operation, offset a carbon footprint or generate additional profit.

Anaerobic digestion is a sequence of processes by which microorganisms break down biodegradable material (also known as biomass) in the absence of oxygen to produce fuel.  On-site digesters facilitate this process. Waste, namely livestock manure, becomes a clean form of alternative energy that can be used as fuel, heat, or electricity.

With environmentally conscious activities on the rise, it’s no surprise that the number of Renewable Natural Gas (RNG) facilities with an anaerobic digestor has increased by 184% in just three short years, up from 87 operational facilities in 2018 to 247 in 2021.  The installation of these systems involves a wide variety of stakeholders, including but not limited to, site owners of dairy, swine and poultry feedstock operations, as well as suppliers, manufacturers, project developers, financing specialists and engineers. While all of these stakeholders benefit from their participation in RNG projects, it’s particularly important for feedstock operators to be aware of the potential upside should they choose to use an anaerobic digester to manage waste.

5 Reasons To Install An Anaerobic Digester

1. Diversify Farm Revenue Streams

RNG is a valuable source of energy which can be sold to energy utility companies and used to power the local grid.  “Tipping fees” can also be earned for the management of additional waste that can be accepted from other local sources.  In addition, organic nutrients from the by-products of digested manure can be sold to local or regional agriculture sources.

2. Leverage Recycled Products to Reduce Costs

Producing a valuable resource that can be sold means money can also be saved.  RNG produced can be used to generate onsite electricity for lighting barns, heat for warming green houses, energy for cooling milk, and fuel for running on-site vehicles.  Products created from manure also lessen a feedstock operator’s dependence on fertilizers and other expenses, such as phosphorus, petroleum and peat moss

3. Conservation of Agricultural Land

Family-owned farms strive to achieve active conservation practices to ensure their legacy is in good condition when it’s time for the next generation to take over.  Anaerobic digesters can help improve soil health by converting the nutrients in manure to a more accessible form for plants to use, while also protecting local water resources by reducing nutrient run-off and destroying pathogens.

4. Favorable Demand Trends for RNG Supply

Assuming Independent Energy Association (IEA) net zero emission goals are met by 2050, worldwide RNG production growth is projected to be 27x the production levels of 2020.  Corporations and universities face pressure from shareholders and regulators to contribute to decarbonization efforts and are starting to make commitments.  The demand for RNG supply will only continue to grow as more and more organizations are being forced to set clearer long-term agendas that address “going green”. 

5. Support Local Economic Growth

Installing an anaerobic digester requires a high degree of sophistication and resources. Engineer, contractor and construction worker roles needed for each project contribute to the creation of local (often times rural) jobs. Not only are these jobs created during the construction phase, but many of them are maintained for long-term maintenance of the facility. Constructing and operating anaerobic digesters offers new local job opportunities and increases local tax revenue

What Makes Installing An Anaerobic Digester Difficult?

Unfortunately, as the saying goes, nothing in life is free.  Installing an anaerobic digester requires significant start-up costs.  Furthermore, finding a lending partner that understands the challenges of being an innovator in RNG, as well as how to structure affordable financing options for leading-edge technologies, can be very difficult.  The vast majority of financial institutions shy away from the complexities of uncertainty.  Whether it’s uncertainty surrounding the technologies, science, overall RNG industry, or a combination of these factors, the hesitation is real.

Luckily, through our national United States Department of Agricultural (USDA) lending platform, the Renewable Energy Lending team at Capital Bank provides expertise in waste-to-energy verticals through several government guaranteed lending programs.  When getting started, you’ll need to prepare a proposal that illustrates a deep understanding of the market, your financial situation and a path to repayment

Conclusion

The opportunity for feedstock operators to procure RNG is diverse and growing as a result of institutions seeking sustainable energy solutions and Federal and State programs gaining traction.  The benefits for feedstock operators that use anaerobic digesters should not be overlooked and can be realized when working with an experienced financial institution on your project.

Contact us today to learn more about what your feedstock operation can achieve on strong financial terms with a partner like Capital Bank.

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About Capital Bank | As a top rural USDA lender, our mission is to help American businesses access the capital they need to grow. During each of the previous five fiscal years, Capital Bank has ranked as a top 10 USDA B&I and REAP lender in the country by total dollar volume, authorizing nearly $400 million in financing.