What is C-PACE Financing?


Overview


Property Assessed Clean Energy (PACE) was first introduced in 2008 in Berkeley, California with a goal to make eco-friendly and sustainable improvements feasible for residential properties. C-PACE is a branch of PACE which allows for larger commercial properties to take advantage of this financial tool.


C-PACE is currently available in 35 states and offers property owners to get low-cost, long-term financing for sustainable upgrades. You can finance projects such as light upgrades, HVAC systems, roof replacements, solar systems, EV charging stations, and much more.


The loan is repaid as an assessment of your annual property tax bill. The funding generally comes from a local government agency or a 3rd party financial institution. Repayment periods are typically from 20-30 years which has an interest rate that gets added on.



How to Qualify?


To be able to qualify, the project has to be located in an area that has an approved C-PACE program. The applicant has to be the legal owner of the property, and must be on the current property tax payments. You cannot be in default on property taxes, mortgage or have a record of bankruptcy in the prior 5 years. The last major qualification for the project is that the amount financed cannot exceed 90% of the property’s value.



Main Benefits and Advantages?


C-PACE financing offers several advantages over other loan programs, with one being the fairly easy qualification process. When applying for the program there is not a heavy look into your credit score/ history; but more of a concentrated look at your property equity, tax status and previous payment history.


The extended repayment periods that C-PACE offers can greatly help companies get a lower yearly payment, allowing for them to have a larger working capital. Keep in mind that a longer repayment period will increase the total interest accrued. However, it offers companies more time and flexibility to be able to come up with the payment.


Another benefit of C-PACE is that it can cover the complete cost of the project while offering no upfront cost. Once the project installation starts you may be eligible for tax deductions or credits, talk to your tax advisor to see how you can utilize them.


Lastly, unlike other loan options, if you finance with C-PACE you can transfer it in the event that you sell the property. This is possible because the program is attached to the property, not the owner.





Downsides/ Disadvantages?


While C-PACE has many advantages to the program, it does have a few downsides. One major downside is the risk of foreclosure on the property if you are not keeping up with payments. Since the PACE loan is attached to the property, if you stop making payments your property is at great risk of being foreclosed.


Lastly, since the payments are usually annually or biannually, there might be a payment shock if you are not properly setting money aside. When saving for the payment, make sure you are adding in the interest rate, C-PACE tends to have a slightly higher interest rate compared to other loan options.