Page 16 - North American Clean Energy November December 2015

solar energy

Increasing Access to Commercial Solar Financing

by Graham Smith

IN THE NORTHEASTERN UNITED STATES ALONE, it is estimated there are over 274,000 costs as lenders approach due diligence diferently, and draft new documentation at the
buildings with the potential to host mid-size solar installations. his represents a start of every application.
whopping $67.5 billion investment opportunity that is currently, largely, being overlooked. he issue of high transaction costs relative to project size is exclusive to the commercial

Last year, commercial solar was the only segment in the solar industry to see negative sector. In utility-scale solar, transaction costs remain high, but the overall value of projects
growth. Why?
is signiicantly greater, making the fees more afordable. In the residential sector, while
One of the key reasons is lack of access to capital. As such, developers of commercial project sizes are small, the standardized loan process drives transaction costs down.
solar projects are restricted in their ability to fund and build solar arrays.
Consistency in residential solar eliminates the signiicant cost and time associated with

due diligence processes, documentation, and inance negotiations.
Transaction costs limit beneit
Streamlining the inancing process is necessary in order for commercial solar to lourish.
Traditional lenders have been reluctant to commit to commercial solar because high While standardizing documentation in the commercial solar sector is more challenging
transaction costs, lack of predictability, and high operating costs make small and mid-size than in other sectors; credit ratings are not as homogenous as FICO scores; commercial

projects unattractive. For example, if a bank accepts a request for a $10 million loan, they projects have core similarities. Consolidating information into a standard set of
can charge a $500,000 service fee to pay transaction professionals and ensure proitability, documents, which can then be used as a basis for contracts and negotiations, is necessary
however, if a loan comes in for a smaller $1 million project, the service fee must decrease for decreasing transaction costs.
signiicantly to make economic sense. High fees are unappealing, and while the bank’s

operating costs remain the same, the value proposition is reduced.
Going Virtual
Across the commercial sector, project size and type varies signiicantly. his, not only Once documents are standardized, there is still the issue of how to speed up the process
results in a lack of predictability for banks, but also in a further increase of transaction
and make it easy to complete and track. he missing piece? Online inancing. In this day
and age, individuals and companies can do almost everything online, whether applying

for a mortgage or credit card, paying electric bills or managing payroll. Creating an online
platform for developers to apply for loans allows them to seamlessly upload, save, and keep
ALL HT PV Testers upgraded to 15A!
track of the detailed documentation required.

he introduction of online loan applications will signiicantly improve the high
transaction costs which are currently hindering the growth of the commercial market.
Borrowers will be able to look at the application and immediately see what information
they need, allowing them to collect all the appropriate documentation at once. By

automating a process that traditionally happens through in-person meetings and over
email, there will be a signiicant cut in manpower and associated costs, as well as in the
time required to complete the transaction.
Using an online process is predictable, transparent, and fast. Predictability is key to

companies working on tight budgets with limited staf. Companies will be able to better set
project timelines, determine where they are in the loan application and approval processes,
and spend less time tied up in what can seem like unending back and forth. Crucially such
an online process will turn what was previously an awkward, costly search for inance into a

frictionless, repeatable, and scalable process.
Overcoming these obstacles in commercial solar inancing will have a fundamental
impact on the industry, bridging the gap between market potential and delivered,
annual installations. Improvements will open the door to build business for many more
All HT Installation Testers and PV Curve Tracers now support up to 15 Amps. The 15Amp
commercial borrowers who may not have otherwise had the opportunity to install solar
capability is keeping to our commitment to be the best supplier to the PV Industry.
projects.
• IV Curve tracers starting at $3,495 • Installation Testers at $1450
Graham Smith is the founder and CEO of Open Energy, an online solar
• Power Quality Analyzers starting at $4,995 • .adding more to the affordability promise
debt inance irm that provides customized project loan inancing for solar
commercial developers and project owners through advanced technology and
HT Instruments America Premier Distribution Partner
its unique marketplace-lending model. Open Energy recently launched the
[email protected] irst online loan application in the solar industry.
http://www.ht-instruments.com
732-952-2111
Open Energy | www.openenergy.com

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