Structure and Design a Finance Program with Loan Loss Reserve Fund
The process for structuring and designing a finance program with a loan loss reserve fund (LRF) typically includes research and preparing a finance program design document.
Research and discussions on finance program design can:
Identify interested financial institutions, determine their level of interest in the program, reveal the financial products they already offer, and determine whether those products are analogous or close to the type of lending the grantee seeks
Help grantees understand project economics from the end-user (homeowner) standpoint, including potential energy (kilowatt-hours) and cost savings, applicable utility rebates and incentives, local/state incentives, and federal tax credits.
The grantee can prepare (or have a consultant prepare) a finance program design document that summarizes the proposed financing program’s structure, including use of the loan loss reserve fund. This can be done in an executive style for review and endorsement by the American Recovery and Reinvestment Act (ARRA) grantee in its official decision making process (e.g., the city or county council).
Financial Advisor’s Scope of Work
Some grantees will use a financial advisor or advisory team to assist them and their program partners in developing and setting up an energy efficiency lending program supported by an LRF. The scope of work for such an advisor or team could entail the following:
Assess the finance component design options researched or prepared by the grantee and recommend a design
Consult with key program stakeholders and participants
Carry out research on financial institutions and confirm the interest of qualified financial institutions to respond to the request for proposal (RFP)
Advise the grantee on ARRA rules and requirements
Fully explain to the grantee and partners the project economics from the end-user’s viewpoint.
Assist in vendor/contractor research and network development as needed.
Prepare a finance program design document and an executive summary for review and endorsement by key local or state government officials. This document should include plans for the FI RFP. Support the ARRA grantee in decision making on the plan to proceed.
Prepare the financial institution RFP for the grantee’s review
Assist the ARRA grantee in conducting the procurement process, to include promoting the RFP, supporting a pre-bid conference (if applicable), reviewing proposals, advising the evaluation and selection committee, and assisting in negotiations with the selected financial institution
Prepare implementing agreements, including the LRF Agreement
Assist in negotiating the loan product and LRF Agreement with the selected financial institution(s)
Advise on the finance program’s start up and implementation.
In the scope of work for the financial advisor, grantees can require written deliverables, such as the finance program design document, the finance RFP, and implementing agreements, with supporting memoranda prepared as needed.