CPACE Financing

CPACE Financing: What is it and how does it work?

The adoption of energy efficiency amongst commercial buildings has progressed slowly due to the high costs associated with retrofitting buildings with renewable energy upgrades. More and more, business owners are turning to PACE financing as a way to pay for these high costs as they look to lessen their environmental footprint and cut down on utility bills. The Commercial Property Assessed Clean Energy (CPACE) program helps commercial business owners, specifically, pay for these upgrades by providing 100% financing and long-term repayment options for eligible energy efficient projects.



The PACE financing program was originally designed to provide funding to buildings wanting to upgrade their energy efficiencies. CPACE is a branch of PACE financing that focuses in on the commercial aspect of business and allows commercial building owners to obtain low-cost, long-term financing for energy efficient upgrades, renewable energy projects, seismic retrofits, water control measures, and even hurricane protection measures for their properties. It’s becoming an increasingly attractive option because the energy improvements can lead to lowered utility bills and may increase property value. Energy efficiency improvements come with a high upfront cost and, once implemented, can take a while to reap the full economic benefits.  CPACE is an innovative solution that allows property owners to install those improvements without having to drain working capital, all while giving them the flexibility to pay back the financing over a term that coincides with the life of the upgrades.

CPACE is available in states where legislation allowing for property owners to voluntarily enter into this type of assessment financing has been passed. CPACE legislation has been enabled in 36 states and the majority of those states have active programs. This special assessment attaches to the property where the improvements are being completed and is repaid on the same schedule as typical property taxes. Since the assessment attaches to the property itself, if the business owner were to sell the property, the assessment would remain on the property and the new owner would assume payments.  Additionally, because the assessment resides at the tax assessor level, CPACE financing requires lender consent from any lienholder on the property.


This image illustrates how a property owner, administrator and lender are involved in a CPACE financing transaction.



  • The property owner: provides detailed costs on the energy upgrades for retrofits or ground-up construction.
  • The pace financing administrator: knows the ins and outs of the program as it relates to that state’s legislation.
  • The lender: finds the right administrator for the location of the project, structuring and facilitating the financing process.

What does this relationship look like?

Example: A hotel owner has owned their hotel for fifteen years and wants to lower their energy costs by installing energy efficient lighting, windows, roofing and HVAC. The hotel owner contacts the bank to inquire about the CPACE financing. The bank will then find the program administrator in the hotel’s region and determine if the project resides within their jurisdiction. The hotel owner and the program administrator will work in unison to determine what energy upgrades are CPACE eligible. The lender and the administrator structure the financing and move the process to close and fund the project.



CPACE can provide 100% financing for eligible improvements. Since the financing does not reside on the business’ balance sheet it can be seen as “equity”. It has a longer repayment term than loans available for the same purpose, and it provides a fixed interest rate for the life of the financing. Because CPACE attaches to the property and not the business or business owner, it is non-recourse and transfers with the sale of the property.



One of the greatest benefits of CPACE financing is that it allows building owners to better afford energy efficient upgrades on their commercial properties. Other benefits include…

  • CPACE assessment payments may be passed along to tenants or hotel guests as part of rent/rate.
  • The tax assessment is attached to the property, so there is no personal guarantee or business guarantee required as there would be with most loan structures.
  • The interest portion of the tax assessment payment may be tax deductible but would need clarification from tax advisor as it may differ from state to state.
  • Because it is a tax assessment, it is seen as off-balance sheet financing so it could be looked at as “equity” in the project or a mezzanine debt replacement.
  • Potentially higher bottom line or net income with energy savings.
  • Long term repayment with CPACE, some programs allow up to 30 years.
  • Generally, no down payment is required (depending on cash flow).
  • The property value should increase with energy upgrades.



It can be hard to navigate the CPACE financing process because almost every state’s program administrator has a different approval process. Because of this, there aren’t many banks in the space. Live Oak is uniquely positioned to be the financial partner of choice for CPACE financing because of our experience in effectively navigating complex and convoluted lending programs.  Live Oak is the USDA’s number one lender for both the REAP and B&I programs[1]. Live Oak is also the number one Small Business Administration lender in America[2].  Live Oak has a track record of simplifying difficult processes and brings that same ability to CPACE.


[1] Source: U.S. Department of Agriculture

[2] Source: SBA 100 Most Active SBA 7(a) lenders by volume in FY 2018