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Solar Finance Evolves as Big Player Arrives

5 min read

Sunshine is free, of course, but to capture it most Arkansans could use a loan.

Enter the evolving and newly aggressive world of solar power finance.

Loanpal, a national leader in the field, opened a planned 100-employee operation in Bentonville last month and is staffing up. With deep pockets and unmatched scale, the company also has an industry star as chairman and CEO: former SolarCity Chief Revenue Officer Hayes Barnard, who sold his Paramount Solar subsidiary to SolarCity in 2013 for $120 million.

Nearby, Shine Solar of Rogers has used Loanpal and other solar finance companies while vigorously expanding operations in five states. “There are five or six national solar loan companies, all ever-changing and sort of competing to be the most aggressive in the marketplace,” Shine President Caleb Gorden told Arkansas Business. “We’re partnered up with all of them.”

Industry leaders also said Loanpal’s arrival might spur local lenders to get into residential solar finance, something they’ve resisted so far, although they are lending for business and farm projects. (See Home Solar Gets Lender.)

Companies like Scenic Hill Solar of North Little Rock and Entegrity of Little Rock have developed complex financing and leasing arrangements to maximize return on investment for homeowners, businesses, nonprofits and even local governments.

Seal Solar is working on a financing arrangement with Loanpal and is pursuing a separate four-in-one deal that would finance a Tesla from Evolve Auto, an affiliated dealership in North Little Rock, along with a rooftop solar array, a Tesla PowerWall, and a charging station for the home garage.

All solar parties are celebrating Congress’ extension of a 26% federal solar investment tax credit through 2023, an element of December’s COVID-19 relief package. The credit has been a significant factor in helping solar systems pay for themselves, industry officials said.

“The vast majority of solar deployment here in Arkansas now relies on third-party funding,” said John Ekdahl, managing partner of AEV Solar of Little Rock. “At one time, the industry’s model relied on heavy capital investment on the front end to eventually capture long-term energy cost savings. However, the number of individuals able to take advantage of this investment strategy is limited.”

Some customers prefer to pay in cash, Ekdahl said, but the average Arkansan needs financing. They also need terms designed to be attractive in the short term. Gorden said 95% of Shine’s customers use financing, including many who could easily pay cash.

Others lack the ability to pay up front but still want the savings and environmental benefits solar power offers.

“Potential clients we encounter understand that solar saves serious money over the lifetime of the system, but before solar-specific loan options were developed,” many prospective customers couldn’t make financing work, Ekdahl said. “Now, thanks to trusted partners in both the residential and commercial sectors, consumers are able to take advantage of long-term, low-interest loan options.”

AEV’s most popular funding sources, he said, are Arkansas Federal Credit Union of Jacksonville for commercial projects and EnerBank USA of Salt Lake City for residential applications.

Solar companies are also marketing these options more aggressively than ever, branching out from a preponderance of Facebook ads five years ago to search-engine-optimization campaigns, videos on YouTube and Google and popup ads on websites and social media.

Loanpal, of Roseville, California, took up residence last month at temporary quarters in Bentonville’s 8th Street Market. The company, which describes itself as “America’s No. 1 point-of-sale payment platform for sustainable home solutions,” said in a news release that it would search for long-term space nearby.

Company representatives referred all questions to Barnard, the chairman and CEO, who was traveling last week and unavailable for a telephone interview, they said. Barnard told CNBC in January that the company had raised $800 million in equity over two financing rounds last year. He added that revenue at the 900-employee company had doubled in 2020 to $361 million.

Loanpal’s proprietary technology platform is used by 12,000 sales professionals and has deployed over $6 billion of capital for solar and other sustainable home improvement projects since 2018, the company said, “empowering more than 185,000 families to live a more sustainable lifestyle.”

Its technology provides homeowners with flexible payment options for utility savings via efficiency upgrades like solar panels, battery storage and energy-smart heating and cooling systems. It is hiring in Bentonville for jobs in customer operations, partner management, software engineering and data science.

Gov. Asa Hutchinson, who has championed technology as an economic development focus in his two terms, described Loanpal’s move to Bentonville as “another example of the growth our state continues to see in the fintech industry.”

The company’s point-of-sale platform connects contractors and installers with homeowners.

Seal Solar President Heather Nelson, for one, welcomed Loanpal’s arrival, hinting that an announcement was imminent.

“We were excited to see Loanpal enter the Arkansas market with its Bentonville office,” Nelson told Arkansas Business. “We’re seeing an increased amount of calls from local and national vendors that want to partner with us to help clients finance or lease their solar projects.”

Over the past year, Nelson said, Seal has completed more solar-and-storage combinations “both for residential customers and commercial entities like Lexicon Inc.,” the major Little Rock steel fabricator.

Requests for electric vehicle charging stations are also growing, she said, “as homeowners and businesses seek to gain long-term control of their energy costs.”

Gorden said two other national solar lending companies that Shine uses “quite a bit” were Sunlight Financial of Charlotte, North Carolina, and Enium Capital Group of Sandy, Utah.

“Like any loan product, they come with underwriting criteria based on a customer’s creditworthiness,” Gorden said. “Generally speaking we’re able to get customers a 20- or 25-year loan.”

The idea, he said, is akin to paying a mortgage on a house as opposed to renting it.

“In a mortgage, every time you make a payment, a portion of that goes to the principal, creating owner equity. When you finance a solar system at 2% or 3% interest, that’s pretty cheap money, and you’ll recapture some of that money as equity. Each payment goes to ownership.”

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