The non-recourse nature of C-PACE financing has several significant impacts on borrowers:
- Protection from Personal Liability: The non-recourse aspect means that borrowers are not personally liable for the debt. If a project encounters financial difficulties, the loan is secured solely by the property and the special assessment, preventing personal financial risk for the borrower.
- Off-Balance-Sheet Financing: Because the outstanding obligations are repaid through a property assessment rather than a traditional loan, C-PACE financing is typically not carried as debt on an owner’s balance sheet. This can help maintain a healthier financial profile for the borrower.
- Cash Flow Management: C-PACE financing is usually structured to ensure that the annual energy savings from the financed improvements exceed the annual C-PACE payments. This allows borrowers to maintain or improve their cash flow, as the savings from energy efficiency measures often offset the assessment payments.
- No Acceleration Risk: Even in the case of default, the C-PACE assessment payments cannot be accelerated. Only the unpaid assessment may be enforced and foreclosed upon, which limits the financial exposure of the borrower.
- Institutional Acceptance: Many lenders are becoming more comfortable with C-PACE financing, recognizing that it enhances property value and cash flow. This makes securing the required lender consent more manageable over time.
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