The process for structuring and designing a finance program with a loan loss reserve (LLR) fund 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 state or local government seeks.
  • Help state and local governments 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 state or local government can prepare (or have a consultant prepare) a finance program design document that summarizes the proposed financing program’s structure, including use of the LLR fund.

Financial Advisor's Scope of Work

Some state and local governments 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 LLR. 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 proposals (RFP).
  • Advise the state or local government on applicable rules and requirements.
  • Fully explain to the state or local government 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 financial institution's RFP.
  • Prepare the financial institution RFP for the grantee's review.
  • Assist the state or local government 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 LLR agreement.
  • Assist in negotiating the loan product and LLR agreement with the selected financial institution(s).
  • Advise on the finance program's startup 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.