C-PACE financing offers several unique advantages compared to other traditional commercial financing options:
Key Features of C-PACE Financing
- Long-term financing: C-PACE loans typically have terms of 20 to 30 years, which matches the useful life of the energy efficiency or renewable energy improvements.
- Fixed rates: C-PACE loans are often fixed rates, providing stability and predictability in payments.
- Lower costs: Compared to other forms of debt like bank mezzanine financing, C-PACE loans are generally more cost-effective.
- Non-recourse: Unlike traditional secured loans, C-PACE loans are non-recourse, meaning they do not personally obligate the borrower.
- No upfront payments: Some C-PACE programs allow borrowers to capitalize interest payments and delay making any payments for up to two years.
- Assessment structure: Payments are made as a special assessment on the property tax bill, which can be passed through to tenants as an operating expense.
Comparison to Other Financing Options
- Bank Loans: Bank loans typically have higher, shorter-term fixed rates compared to C-PACE. They often require personal guarantees and may not offer the same long-term stability as C-PACE.
- Mezzanine Financing: This type of financing is more expensive than C-PACE and is often used when more capital is needed beyond a senior loan. C-PACE can provide a lower-cost alternative to mezzanine financing.
- Traditional Mortgage Loans: These loans are secured by the property and may require larger down payments. They do not specifically target energy efficiency or renewable energy projects like C-PACE does.
- R-PACE (Residential PACE): While similar in structure to C-PACE, R-PACE is designed for residential properties and may have different eligibility criteria and investment levels.
Advantages of Using C-PACE
- Flexibility in Use: C-PACE can be used for new construction, renovations, or retrofitting projects to enhance energy efficiency and sustainability.
- Transferability: The assessment, and thus the loan obligation, stays with the property if it is sold, which can be beneficial for long-term property owners.
- Government Encouragement: It is supported by state-level policies that classify clean energy upgrades as a public benefit, facilitating better financing terms.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-do-c-pace-financing-terms-compare-to-other-financing-options/
