Our first job is to explain what it is that we do:

MCED has a special authority to put borrowers and investors (lenders), together.  Before the enactment of the PACE Act, this interaction was not possible and so, until now, it has been difficult to efficiently finance energy improvements on private property. The PACE Act was established to address known barriers to the advancement of energy efficiency and renewables in the country. These barriers were recognized long ago but only addressed recently.  They include common complaints of property owners; the need for upfront capital, uncertain return on investment in case the property is sold, and interest rate risk resulting from loan repricing. PACE addresses each of these by enabling access to capital markets with an appetite for lending to private property owners 100% of the need on a long term fixed rate basis and allowing the debt to be associated with the property rather than the owner.

Traditional capital sources:

We often are asked;  “why can’t people just go to their bank and do the same thing?”  And the answer is, they can! . . . But they generally don’t.  And here is the perfectly simple reason why not.

Any bank worth its salt knows its customers and wants to help them finance their needs. That’s why they are in business after all.  

A property owner’s first natural impulse is to visit the bank and they are invariably met by their friendly banker who wants to help.

The problem often encountered next is neither the fault of the borrowing customer nor the willing banker. The problem is in getting to the terms of an agreement for a transaction that the bank is unable to fund because of the project type itself.

Banks are restricted from lending to customers for long periods of time at fixed interest rates. This restriction is imposed by federal and state banking regulators.  Normally, that isn’t a problem. However, because the project types we are discussing most often require a long-term, fixed-rate transaction it becomes a problem for energy improvement financing.

The reason is because most energy improvement projects are intended to pay for themselves through energy cost savings. Often this requires a longer term borrowing with a preference for a fixed rate. No one wants to risk an interest rate reset that might jeopardize their positive cash flow project. (see “This is Bob” )

Because this problem was recognized by policy makers, special authority has been provided to MCED to establish programs bringing the proper capital sources to communities throughout Missouri –not because we desire to compete with banks or deprive them of any business, but rather to address a market need that until now has not been able to be served.