Here are 6 common PACE myths and the facts behind each. If you want clarification on a PACE topic, we’ve got answers.
Myth 1: PACE can’t fit into my capital stack.
Fact! PACE financing provides low-cost funding advantages to projects that include sustainable design and energy efficiency measures. Most commercial projects can qualify for some PACE financing since modern building renovations and new construction projects include efficient equipment and energy-saving measures.
PACE financing can be added to your capital stack:
- To increase overall financing and leverage
- As an alternative to more expensive equity options or mezzanine funding
- To allow you to stay liquid or maintain owner equity for your next project
- To cover cost overruns from change order or escalating construction costs
- To ensure your energy efficient design choices don’t get value engineered out
- Myth 2: My lender won’t approve of PACE in my capital stack.
Fact! In fact, 8 out of 10 deals at PACE Equity START with primary lenders who are unaware or uncomfortable with PACE. If this happens to you, don’t be surprised! However, over 200 lenders across the U.S. (large and small), have already consented to PACE in the capital stacks they fund. We’ve talked to lenders hundreds of times and are experts at educating lenders on the merits of PACE in a capital stack (read our recent blog on this topic!). If you talk to a lender about PACE and they push back; call the experts at PACE Equity!
Myth 3: I can’t use PACE because I don’t want to change my building design.
Fact! Most projects can qualify for some PACE financing with modern building practices without any changes to design. If you want to maximize PACE proceeds, PACE Equity can work with project sponsors to analyze and recommend design enhancements or minor adjustments which can drive up the amount of PACE funding for which you qualify.
Myth 4: PACE financing doesn’t work with my financials.
Fact! PACE is a voluntary source of financing that falls below the line and should be treated as a debt service constraint and not an operating expense. It is not an increased property tax. Municipalities want to encourage commercial building to be sustainable, so they have adopted PACE and a simple special assessment structure as a vehicle for payment which makes it transferable with the property.
Myth 5: PACE is too complex for me and my project.
Fact! PACE Equity offers a Fast Track™ Funding process that guides you through step-by-step from a first pass estimate to funding. The first time you do a PACE project it often feels like you have a lot to learn, but we’ve done hundreds so you can rely on us to make it easy.
Myth 6: PACE requires a municipal grant to fund it.
Fact! PACE financing is private capital funding. Financing decisions are made independent of any municipal entity. The local municipality is involved as the administrator of the special tax assessment which is the mechanism for repayment of the PACE financing. Using the tax assessment structure allows the debt to be transferred easily to the next owner.
Learn more about PACE financing from PACE Equity.
Ask your local Managing Director how you can get started today to boost your IRR with PACE financing.