Here are several key indicators that might help you and the client/property owner select the right financing option for this project:

Amount requested –

Projects less than $300,000: best to use credit-based borrowing like a loan or a capital lease (see: What is a Cap Lease)
Those instruments will rely primarily on the applicant’s history of borrowing and record of repayment and/or a Dunn&Bradstreet (D&B) score.

Absent a history of borrowings visible via PayNet, some funders may be unwilling to be the first to issue credit, even with a great personal credit score from the guarantor.  A bad score on PayNet (like a bad personal credit score) is damning and the applicant will not have success until their record is cleaned up.

A D&B score of 80 or better is desirable; it indicates that a business pays its debts on time.  If the client has successfully borrowed capital before for equipment, machinery, or other hard good, and the amount of this project is not more that about twice past borrowings, then a capital lease should be successfully obtained.

If the client has no history of borrowing and no D&B, then the only way to evaluate them is through tax returns or CPA-prepared financials.  If those do not show profits at least the size of the amount requested, the underwriter will deny the loan.

A personal guaranty becomes critical when financials show stable revenue and modest gross profit (at least the amount being borrowed); at that point, a minimum credit score of 680 is required for a personal guarantee to overcome the risk presented by the corporate credit (some underwriters have a higher requirement)

BidDesk PPA‘s have even more stringent credit requirements for that size system because they are proposing to invest in a 20-year relationship.  Few investors will look at sub-300k projects, but those that do will need at least all the above criteria to be met.

Take-away: If the applicant has no history of commercial borrowing, no D&B, tax returns that present minimal or no earnings, and a personal score below 680, ….do not proceed.

Projects Over $300,000: For both credit-based borrowing (loans, cap leases) and 3rd-party owned financing like PPA’s via BidDesk, the financials become key because the company must be able to show that their gross sales volume is 5 to 10 times the amount they are looking to borrow, and the repayment of the loan is no more than 20% of their profits.

Take-away: above that amount and up into the millions of dollars of requested funding, the personal credit score no longer plays a role.  If the customer does not have tax returns steadily showing revenues that are higher than the amount borrowed, as well as positive PayNet and/or D&B, then neither the PPA nor credit-based financing are likely to extend funding.  There are always, of course, exceptions and mitigating circumstances.

When to choose C-PACE – (see What is C-PACE)
Notwithstanding its many advantages, C-PACE comes to the rescue of mediocre financials.  Because there is the lien of the lender/investor in PACE is so strong, the funder will take more risk with a borrower who may have uneven earnings, or an debt service coverage that is too low for fully credit-based instruments like loan or cap lease.   But because C-PACE is heavy in fees and underwriting costs, as well as heavy in program administration like having to demonstrate energy savings etc, C-PACE only begins making sense above $500,000 in project size.

Take-away: Because C-PACE relies on the available, free-and-clear equity in a property, it relieves pressure to present stellar financials. But the project must be of a certain size to make the process worthwhile.

When to use C-PACE and or PPA (via BidDesk)
When the improvement will drastically improve the financial picture.
(writing of this section still in process)