Top-Level Takeaways
- Businesses in Arlington County, VA, can tap a government-guaranteed loan program for environmentally conscious upgrades.
- Arlington Community FCU funded the program’s first project, solar panels for a local restaurant. The credit union says the right incentives could increase the popularity of programs like this.
A culture of environmentalism and sustainability has taken hold at Arlington Community Federal Credit Union ($401.1M, Arlington, VA). Starting with conserving power and paper, the mid-size credit union, which serves two counties and two cities in the Washington, DC suburbs, is now dipping its toes into sustainable energy lending.
In 2015, the state of Virginia passed legislation enabling Commercial Property Assessed Clean Energy (C-PACE) programs, which allow owners of commercial and industrial buildings to use private sector money to finance energy efficiency, renewable energy, and water efficiency improvements to their property. More than 30 states have passed legislation enabling C-PACE programs.
Arlington County established the first C-PACE program in Virginia in 2017, and ACFCU was eager to participate.
We’ve been working with C-PACE for several years, looking for a project, says Marty Weitzel, director of business lending at ACFCU.
The cooperative found the right borrower in 2021.
Rocklands Barbeque & Grilling Company owns three DC-area locations and a food truck it also has been an ACFCU member for several years. And because one of the restaurant’s locations installed solar panels several years ago, it knows its way around environmental loans. In July 2021, ACFCU became the first C-PACE program lender in Virginia when it agreed to finance two solar panels on Rockland’s Arlington location.
In this Q&A, Weitzel discusses Rocklands, the C-PACE program, and his hopes for future sustainable initiatives.
What made Rocklands the right partner for this C-PACE loan?
Marty Weitzel: They’re a long-term member in good standing and a good business. Plus, they have solar panels on one of their restaurants, so they were familiar with projects like this and already had a strong relationship with an installation contractor. We knew they could pay it back, we just had to figure out the ins and outs of the C-PACE program.
How does the program work?
MW: C-PACE, and Arlington County by association, guarantees each loan 100%. It works similarly to an SBA loan, with the borrower here paying C-PACE a flat 2% fee on the loan amount. The loan term can extend up to 10 years, at a minimum of $50,000, with the lender setting a fixed interest rate for the life of the loan. Our general rule of thumb is the shorter the loan, the lower the fixed interest rate and vice versa.
The guarantee makes it easier for lenders like us to do these loans. If we didn’t have this program, we would likely take a lien on the borrower’s business assets. If that loan were to go bad, we’d repossess the solar panels and look to resell them, which is complicated. The program makes it easier for businesses to access capital and invites environmental lending opportunities.
Is this more complicated than a traditional business loan?
MW: It was a little more cumbersome. Although the county is providing a guarantee, it wants us as the lender to take a collateral filing as well. But rather than take a filing on the real estate, we filed a lien subordination with the county and had the bank that holds the primary mortgage on the property agree that if something were to go south, we’d get paid off first. In reality, Rocklands is in great shape and this is not something we’re worried about.
Are there other projects you’re looking to fund?
MW: I’ve been in contact with local brokers who are interested in the C-PACE program for their business clients, restaurants or otherwise. We anticipate one or two new program participants by the end of 2021. We’re proud to be the first to lend through this program in Virginia and hope to use it to find environmentally sustainable lending solutions for our business members.
If Virginia introduced more tax credits for sustainable energy initiatives, I believe we’d see more demand for these types of projects. It’s something we should be paying attention to. Sustainable energy initiatives are an important part of what community lenders should be doing. Hopefully this is the decade we address these things seriously.
We want to lead the market on environmentally sustainable lending efforts. Our goal for the business lending department at ACFCU is to become industry experts in real, true blue community lending.
Do you see an easier path toward funding these projects in the years ahead?
MW: We plan to participate in these programs in perpetuity. It’s the right thing to do; hopefully, it becomes the cheap and easy thing to do, too. In the past 18 months, governmental policy has driven a trend in lending toward community investment and infrastructure. We’re going to be in an environment for the next several years where the government injects trillions of dollars into the country by using financial institutions as the go-between.
The PPP program is a perfect example. Every participating bank or credit union was essentially a government contractor, facilitating Treasury dollars guaranteed by the SBA. It was profitable for us to do so, not that it needed to be because we are a not-for-profit and have a responsibility to our community and members to participate in programs that benefit them. If these types of programs continue and the incentives are increased, you’ll see demand from borrowers and lenders alike.
As it relates to the C-PACE program, how will ACFCU recruit further business?
MW: Scott Dickie at C-PACE is telling everybody who will listen that we were the first in Virginia to fund a loan through this program. We have a few representatives from the Arlington County government who source business for us, but Scott from C-PACE tells everyone to call Marty.
What did you learn from this experience that you’ll use in the future?
MW: These programs are not as difficult and cumbersome as they might seem. It’s hard to do a new thing for the first time; in fact, it took us about two months to do the Rocklands loan. Having done it, I’m confident we could do the next one in three or four weeks.
What’s your long-term hope for the sustainable efforts at ACFCU?
MW: We want to lead the market on environmentally sustainable lending efforts. Our goal for the business lending department at ACFCU is to become industry experts in real, true blue community lending.
We’re not corporate bankers. We’re mom and pop bankers. I want my department to be subject matter experts, advisors, and guides in community lending programs. We want to be involved in anything that’s going to improve the community where our members live and work. Becoming subject matter experts in programs like C-PACE makes it easier for our businesses and property owners to move in an environmentally friendly and sustainable direction.
This interview has been edited and condensed.