A lending program begins with a financial institution that procures the funds it lends from a number of other sources.

Types of financial institutions include:


These can be large national banks (Wells Fargo or Bank of America), regional or super-regional banks (U.S. Bank or Fifth Third Bank), or banks that operate in a geographically defined area (the National Bank of Arizona or the Bank of Colorado). The latter tends to be more closely entwined with their communities than the larger banks. For that reason, geographically defined banks may be the most attractive to state and local governments, despite the fact that those banks lack the broad reach and large number of branches (convenient access for home and business owners) of the large national or super-regional banks.

Any bank that focuses heavily on mortgage lending will be accustomed to closing loans that are well above $100,000, which they, in turn, sell to a secondary market investor. Banks are also familiar with home equity loans and home equity lines of credit through which consumers borrow money and the banks place a lien as security on the homeowner's primary residence. Those large, secured mortgage loans are quite different from the small consumer-oriented unsecured loans that in many cases support energy efficiency retrofits in homes. The bank departments that are most likely to be comfortable with unsecured residential clean energy lending programs are the consumer finance departments that work with unsecured lending. One national bank, EnerBank, now specializes in clean energy loans for consumers.

Larger loans that might rely on home mortgage refinancing, home equity loans, or energy efficient mortgages are typically housed in a separate department dealing with home mortgages. Commercial lending, on the other hand, often falls into a different department altogether. Not all banks that make home mortgages or do consumer financing also do commercial lending. Learn more about financing program market segments.

Credit Unions

Credit unions are nonprofit organizations with a charter to serve the financial needs of specific parts of a community, whether it is an employer group, a group of graduates of a particular university, or some other defined group of people. Examples include the State Employees Federal Credit Union in New York or the Navy Federal Credit Union. Like the community banks mentioned above, credit unions tend to be highly community focused, but in some cases they lack the broad geographic reach of a large national or super-regional bank. Credit unions typically focus on lending as a way to support the community or members for which they operate. Many credit unions already do small consumer lending—used car loans offered through used car dealers, for example. Credit unions are often very well-suited candidates for clean energy lending with which state and local governments should seriously consider developing partnerships.

Community Development Financial Institutions

Community development financial institutions (CDFIs) are nonprofit financial institutions that aggregate lending capital from a mix of federal or state government, foundation, and private capital sources and relend that money to targeted groups. Some CDFIs target their lending to small businesses, others target lending to nonprofit institutions, and a very small number of CDFIs target lending to the residential single-family sector. These financial institutions typically operate small offices with only a few staff and tend to make loans (usually larger than $100,000) to organizations that cannot secure lending from banks or credit unions. CDFIs can be ideal partners for state and local governments because of their community-based missions. Governments should bear in mind that CDFIs tend to be both capital and capacity constrained; the capacity constraints often mean that they do not have the staff to process the large numbers of small loans that are common in the single-family residential sector.


Utilities can be financial institutions, but are often reluctant to serve in that role. Their reluctance stems from three concerns: (1) legal and regulatory requirements related to serving as a lender, (2) the cost of developing computer systems to handle principal and interest payments and collections, and (3) any financial liability they may incur as a result of making and holding loans. Some utilities do, nonetheless, offer clean energy lending programs, primarily serving commercial borrowers. Learn more about financing program market segments.

Government Financial Institutions

Government financial institutions can include state energy offices, state-chartered finance authorities, or their local government equivalent. Many of the first generation clean energy lending programs from the late 1980s and early 1990s began with government financial institutions. As a rule, most government financial institutions are capacity constrained in the same way as CDFIs and have limited ability or desire to originate and service loans—particularly small residential loans.

Specialized Financial Institutions

A number of specialized financial institutions operate in the clean energy lending space. These nonbank finance companies have access to capital from a variety of sources. Examples include the three Fannie Mae-qualified clean energy loan program financial institutions (AFC First, Viewtech, and Energy Finance Solutions) and the Electric & Gas Industries Association.

Review the roles of Partners and Stakeholders of financial institutions in more detail.