In order to minimize the monthly payments made by the homeowner, several financing providers such as Sungage Financial, Enerbank and Green Sky offer a loan bundle: a 12 month loan against the Investment Tax Credit (30% of the project's cost) and a longer term loan for the balance of the project cost (70%). The two loans overlap.
From the homeowner's perspective, she applies her ITC tax credit to "buy down" (reduce the principal) of the loan, and then she continues making monthly payments for the duration of the loan. Check the requirements of your lender - if she doesn't buy down the loan her monthly payments may significantly increase. This is how to model this loan structure:
- Go to your account Settings. Click on Financing Templates then Create New Template. Give your template a descriptive name that you will later be able to understand.
- In the Basic Information section, click on Loan.
- Click on the pencil icon to input your Project Useful Life and your Discount Rate (we chose 25 years and 3.0%).
- Input your Degradation Factor, Inverter Replacement Cost and Inverter Life (we chose 0.5%, $.35/W and 13 years).
- Input your tax rates (we chose 0%). Please contact a tax attorney for more information on whether your solar project's returns should be taxed. In our experience, in the US residential solar returns are never taxed.
- Add your Incentives.
- Click Add Loan and select Bullet. Give your loan a descriptive name that you will later be able to understand.
- Principal Percentage should be set to 30% in order to match the Investment Tax Credit.
- Input your Dealer Fee, Interest Rate, and the Duration of the loan (we chose 4.5%, 0% and 12 months). Click OK.
- Again, click on Add Loan but this time select Mortgage-Style. Give your loan a descriptive name that you will later be able to understand.
- Principal Percentage should be set to 70% (this is the balance of the project cost).
- Input your Dealer Fee, Interest Rate, and the Duration of the loan (we chose 14.5%, 2.99% and 144 months).Click OK.
- Lock your immutable fields.
We highly recommend that you lock fields that will not change between different designs. This will save your team time and reduce errors.