C-PACE financing offers interest rates that are generally competitive with or lower than those of traditional loans, particularly when compared to short-term or floating-rate loans. Here’s a comparison of C-PACE and traditional loans:
Key Differences:
- Interest Rate: Traditional loans, especially short-term or variable-rate loans, often have higher interest rates compared to C-PACE. C-PACE interest rates can be roughly 300 to 400 basis points over the 10-year Treasury yield, which currently translates to about 7%. Traditional bank loans may have higher rates, especially in periods of high interest rates.
- Repayment Term: C-PACE loans are long-term, typically spanning 10 to 25 years, which matches the useful life of the installed equipment, whereas many traditional loans have shorter terms. The longer term can make monthly or annual payments more manageable.
- Security and Priority: C-PACE loans are secured by a property lien that takes senior status over traditional mortgages in most cases, providing a high level of security for lenders. This senior lien status allows C-PACE lenders to offer relatively low interest rates.
- Down Payment: C-PACE financing often requires no down payment, as it can cover up to 100% of project costs. Traditional loans usually require a significant down payment.
Advantages of C-PACE Over Traditional Loans:
- Lower Cost of Capital: By offering fixed, long-term rates without requiring a significant upfront investment, C-PACE can be more affordable for property owners.
- Enhanced Leverage: The ability to increase construction debt and improve the overall capital structure is another advantage of C-PACE.
Overall, C-PACE provides a favorable financing option for commercial property owners seeking energy-efficient upgrades or renewable energy projects, especially in environments with high traditional loan rates.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-interest-rate-of-c-pace-compare-to-traditional-loans/
