3 Tips To Finance Your Renewable Energy Or Energy Efficiency Project
It doesn't matter if you have the best project in the world. Without answering the following 3 questions, your renewable energy or energy efficiency project probably won't get funding.
1. What is your previous experience with a renewable energy or energy efficiency project?
Lenders and equity investors don't want to put money into your first project, or your second, or third most likely. I know it is a chicken and egg problem, but it is true. A proven track record helps tremendously in opening up financing options. If you don’t have experience with a project that is successful, your best option may be to partner with someone who does.
2. What is the project?
This may seem like a loaded question, but at the end of the day all this comes down to is have you crossed your t’s and dotted your i’s. Outline your project in black and white. Lending and equity institutions are in the business of minimizing risk and are interested in projects that are clearly explained in detail. In addition, they want proven technology and like to do business with organized and experienced developers.
The more proof the project is going to be viable, the better. Creating a project plan that includes any of the following, is helpful: site control agreement, a power purchase agreement (PPA), an interconnect agreement, permits, contracts, warranty information, etc.
3. What is the repayment plan?
A famous movie line once said “show me the money”. This is the golden rule for any equity or debt provider. What is their exit strategy? Investors want a credible plan for repayment. Whatever the method of repayment, a repayment plan should be well documented through spreadsheets, contracts and include any other relevant supporting information. This should also include providing collateral.
If the project goes bad, how are the lenders/investors being repaid? The financial strength of the developer or borrower will be important. Be prepared to provide full financial information including a balance sheet, income statements and tax returns.