What is a Revolving Loan Fund?
In this week’s Fund-It Fast Chat* SJVCEO dove into revolving loan fund… I mean revolving energy fund and what that even means.
Think of it this way when you set aside funds/savings you automatically have a coffer of funds on hand to designate specifically for energy projects. So, let’s break it down:
1. Set aside savings from past projects into a pot called “revolving energy fund”
2. Funds can be taken from this pot of money for energy projects. Savings from these future projects are then tracked and used to replenish the fund for the next round of projects.
3. If you’d like to get fancy, you can establish interest payments on the money taken out for projects for costs of maintaining the fund are minimized.
Now that you know the basics of what an energy fund is let’s talk about how you create one. Option 1 have seed funding from a fixed pool of internal funds (i.e. grant funding) or option 2, 3rd party financing such as government sponsored or managed monies. Either of those options are great it may just depend on what your council/management are comfortable with.
So why are we talking up energy funds so much…well the same capital is used repeatedly resulting in ongoing savings. This means that, as the fund grows, projects can be completed with little to no extra cost. This is especially true because these funds can be used in conjunction with other programs or incentives to fully finance a project.
Don’t get us wrong there are some downfalls with an energy fund. Once the 1st loan is out, lending activity can slow based on how quickly repayments via savings come in. Which brings me to the 2nd, a Revolving Energy Fund, like most programs, has administration costs and time associated with maintaining it. Tracking savings for the fund is crucial for its success.
*Fund-It Fast Chat is a short 20-minute monthly webinar hosted by SJVCEO to address items in the energy and sustainability arena. Please email info@sjvcleanenergy.org to subscribe to the webinars.