C-PACE (Commercial Property Assessed Clean Energy) Financing
C-PACE financing offers a distinct repayment term compared to traditional loans:
Key Features of C-PACE Repayment
- Term Length: C-PACE financing typically offers longer repayment terms, ranging from 10 to 30 years, depending on the state and the useful life of the installed equipment.
- Repayment Method: Repayment is made through a special assessment on the property tax bill, ensuring that the obligation is tied solely to the property and not the individual.
- Amortization: C-PACE assessments are self-amortizing, meaning the payment covers both interest and principal over the term of the loan.
- Non-Recourse: C-PACE financing is non-recourse, meaning that the lender cannot pursue the borrower personally for repayment if the property does not perform financially.
Traditional Loan Repayment Comparison
In contrast, traditional commercial property loans often have:
- Shorter Terms: Typically, fixed rates are available for shorter terms, often less than 10 years, though longer terms may be available with adjustable rates.
- Higher Rates: Interest rates are often higher than those offered by C-PACE programs, and variable rates may increase over the loan term.
- Recourse: Many traditional loans require personal guarantees, making the borrower personally liable for repayment if the property fails financially.
- LTV and Debt Service Coverage Ratio (DSCR) Requirements: Traditional loans may have stricter LTV (Loan-to-Value) and DSCR requirements compared to C-PACE, which can offer more flexible financing options.
Overall, C-PACE provides a low-cost, long-term financing solution with repayment terms that are more favorable for property owners investing in energy-efficient and renewable energy projects.
Original article by NenPower, If reposted, please credit the source: https://nenpower.com/blog/how-does-the-repayment-term-for-c-pace-compare-to-traditional-loans/
