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The Problems with PACE Loans

If you’re considering taking steps to improve your building’s energy efficiency, you’ve probably heard of a Property Assessed Clean Energy (PACE) Loan. These programs allow state or local governments to loan businesses and homeowners the money needed to install energy efficiency improvements. These loans don’t require a down payment and can be paid off slowly. 

Sounds great, right? Well, they can be for certain projects, but there are also some serious problems with PACE loans. 

1. High risk

Once you take out a PACE loan, you’re on the hook for paying that money back regardless of how well those upgrades work. Maybe you’re planning on paying the loan back with the savings you see on your electric bill, but if you don’t save as much as anticipated, you still have to pay back that loan. 

2. High rates

PACE loans are loans, which means that you’ll be paying interest on top of the cost of the efficiency system. These programs vary from state to state, but the interest rates are often higher than your typical mortgage or other type of property loan. It’s likely that you’ll be paying back the loan for a long time.

3. Long-term

During the 10-20 years you’ll spend paying off your improvements, something better will probably come along. Energy efficiency technology is getting better and more affordable every day. While other buildings are getting the newest tech, you’ll still be stuck paying off your old system.

4. On-balance sheet

With a PACE loan, you’re paying for upgrades with debt, which winds up on your company’s balance sheet. Even if you can offset the loan payments through energy savings, it still shows up as debt in the company’s name.

5. Upselling and overbuying

To obtain a PACE loan, building managers often go through a company that does efficiency upgrades. Wanting to make as much money as possible, those companies frequently try to upsell their customers, saddling them with costly equipment. 

6. Less flexibility

With an expensive, long-term commitment like a PACE loan, building owners are stuck with their equipment, their loan terms, and sometimes their building for up to 20 years. 

There is another way to get energy efficiency upgrades. With D.I. Pathways’ monthly utilization agreement, building owners can get no-risk efficiency upgrades for a low monthly fee. This equipment can be taken out or upgraded at any time for no cost, so you never get stuck with a long-term contract or old technology. 

To learn more about these risk-free energy efficiency upgrades contact D.I. Pathways today.

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