To avoid or reduce the capitalized interest in C-PACE financing, property owners and developers can explore several strategies:
- Project Timeline Optimization: Ensure that project timelines align closely with the disbursement schedule for C-PACE funds. This minimizes the period over which interest is capitalized before actual costs are incurred.
- Negotiation and Flexibility: Some C-PACE lenders offer flexibility in structuring payments, allowing for the capitalization of interest over a limited period. Negotiating these terms upfront can help manage costs.
- Early Drawdown and Repayment: Minimizing the time between closing and the actual use of C-PACE funds can lower the capitalized interest burden. However, this approach may require more efficient project execution.
- Alternative Capital Structures: Consider combining C-PACE with other financing options that have lower or no capitalized interest costs, potentially reducing overall interest expenses.
- Utilize Flexible Repayment Terms: Since C-PACE loans are typically non-recourse and have extended repayment terms (15-30 years), property owners can manage cash flow by spreading out payments over time, which may offset some capitalized interest costs.
- Energy Audit and Cost-Benefit Analysis: Conducting thorough energy audits can help ensure that C-PACE financed improvements yield significant savings, potentially offsetting the increased costs associated with capitalized interest.
In summary, while capitalized interest is a feature of C-PACE loans, managing project execution, negotiating favorable terms, and leveraging the long-term benefits of these loans can help mitigate these costs.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/are-there-any-ways-to-avoid-or-reduce-the-capitalized-interest-in-c-pace-financing/
