Commercial solar AMA: Highlights from webinar

At our commercial financing webinar back in August, the slides went fine. But what we keep finding, especially with commercial, is that the Q&A is the most valuable part of the hour. That's when installers start asking about the deals actually sitting on their desks.

So for round two, we threw out the slides. When people registered, we asked them to tell us which commercial project they were stuck on, and we got a whole bunch of questions. Some were about financing. Some were about design. Most were about the spot where commercial projects tend to die, which is usually one or the other.

On September 15th we hosted Commercial Solar AMA: Bring Us the Project You're Stuck On. Here's the short version.

‍Moderator: Scott Nguyen, OneEthos and Bodhi

‍Panelists:

• Dema Headley, SVP of Digital Banking, Climate First Bank
• Mary Jane "MJ" Gilliland, Commercial Design Project Lead, Greentech Renewables

What we covered

• What gets a commercial deal financed. Dema said it comes down to debt service coverage ratio (DSCR). Climate First Bank wants to see at least two years of the business handling its debts, at 1.00x for owner-occupied properties and 1.25x for non-owner-occupied, which carry more risk. And if the property is titled to an LLC or corporation, or zoned commercial, it runs through commercial even if it looks like a house (think the doctor's office in a converted home).
• The loan terms and fees, in plain numbers. 7.99% fixed for 30.5 years, with the first six months interest only during construction. No dealer fees and no prepayment penalty. There is a 1.5% origination fee plus a $950 setup fee, and both can be financed. Loans run from $25,000 (with at least $10,000 going to the solar portion) up to Climate First Bank's $25 million legal lending limit, in all 50 states and DC.
• Adder caps on carports and re-roofs. A carport falls under the roofing adder cap, which is currently 45% of the total project cost. If the carport costs more than that, the customer can still finance up to the cap and cover the difference with a down payment. Just document it on the proposal or contract.
• Tax credits and underwriting. Customers who own the system claim the ITC themselves, along with accelerated depreciation. But Climate First Bank doesn't count tax credits in underwriting at all, and it doesn't require FEOC or domestic content compliance. If the credits come through, the borrower can apply them to the loan and have the payment re-amortized. On safe harbor rules, the whole panel was clear that nobody on it is a tax expert, so talk to a tax advisor.
• Who does what on the application. Your job is to send the referral and support your customer. The business owner fills out the application and uploads financials themselves, because the bank can't collect them from you. As Dema put it, "You can be there as a support to help make sure they complete everything, but they have to complete it, not you."
• Getting a defensible consumption and peak demand number. Several people asked a version of this one. MJ's answer was 15-minute interval data from at least the past year. Utility bills work for a back-of-the-napkin check, but interval data is what holds up in front of a customer or a lender. Some utilities make it easy through Green Button, others you have to request it from directly, so ask for it on your first few calls.
• Storage on commercial projects. MJ estimated 40 to 50% of her commercial projects attach storage now, and Dema said Climate First Bank is seeing around 60%. Demand charges are still part of it, but a lot of smaller businesses (law offices, doctor's offices) want to keep the lights on during outages in places like Florida and Texas. Whether a battery pencils out is very situational, and for utility rate modeling MJ goes to Energy Toolbase.
• How commercial design works at Greentech. You submit an RFQ through the design portal and usually get a quote back within a day. From there, a straightforward system takes about five to six business days to draft, plus three to five more if you need stamps, so about two weeks and change end to end. Plan sets can range from a 30% interconnection set up through 60% permit and 90% construction sets, and pricing usually shakes out to a couple cents a watt all in. Greentech customers can also get free preliminary commercial designs.

The one thing they want you to do this week

We closed by asking Dema and MJ for one practical thing every installer on the call could do this week or next.

Dema's was to have the financing conversation with the commercial customers already in your pipeline, starting with whether they're paying cash or financing, before anyone spends time on a deal that isn't going to fit:

"Don't just try to see if it sticks. That's wasting your time, and it's a poor experience for your customer."

Her point was that even when the financing doesn't work today, that upfront conversation builds the relationship for when it does. The Commercial Loan Process Cheat Sheet from the session walks through the process and which documents are needed at each stage.

MJ's was to take a design-driven approach to quoting. Do a thorough site walk, or ask the right questions early if you can't. What condition is the roof in? Can it hold the PV? What are the interconnection options?

"The earlier you can discover those things and kind of assess your options, the better off you're going to be, the better you're going to be able to price this to the advantage of your customer and your business."

Dema backed that up with a story from the night before. One of her commercial borrowers was frustrated because they found out they needed a transformer upgrade to make their system work, and the customer told her the same thing MJ did: find that out upfront.

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Watch the full webinar here

If you've got a commercial project that's stuck, or you just want to know whether a deal will survive the financing screen before you design it, the Climate First Bank team would love to walk through it with you. Find a time to talk below.