Direct Loans
With direct loan financing, MnCIFA is providing capital directly to a borrower.
MnCIFA’s direct loan provides low-cost financing and flexibility through a range of options, such as:
- Low-interest loans - offering interest rates below market value based on numerous factors.
- Bridge loans – covering upfront costs for a clean energy project, with loan repayment based in part on the project receiving federal Investment Tax Credits or other similar funding situations.
- Patient capital – loans with deferred payment on the principle (interest-only payments) until the project collects revenue for loan repayment.
- Portfolio loan – financing to one developer for one loan that encompasses financing for multiple clean energy projects, such as rooftop solar at multiple sites that have different owners.
Application process
Our application process begins with a preliminary review of your proposal for financing through a pre-application form with a few basic questions about your clean energy project and financing needs.
The pre-application form will help MnCIFA staff understand your proposed project and the extent MnCIFA financing could support the project.
After our preliminary assessment, we may invite you to submit a full application. Projects that move forward with a full application move through a process similar to a commercial loan from a traditional bank, with due diligence and detailed financials.
Learn more: MnCIFA’s application and lending process.
Pre-application form: Direct Loan
Underwriting considerations and terms
Loan Size
- MnCIFA direct loans have, to date, ranged from $250,000 to $5 million. There are opportunities for loan amounts that are larger, depending on the situation.
- MnCIFA can work with co-lenders to bring sufficient resources to larger projects and to increase the development impact of the transaction.
- While state law requires MnCIFA to loan a single entity at least $250,000, we can provide financing via an intermediary revolving loan fund or for a portfolio of smaller projects that, in the aggregate, exceed the $250,000 minimum.
Tenor (loan term)
The loan tenor is typically between 2 and 7 years, depending on the type of project and debt servicing capability. However, each transaction will be evaluated on a case-by-case basis and MnCIFA has issued loans for terms of up to 10 years.
Costs
MnCIFA can offer flexible loan terms, under state law. Interest and fees will vary depending on the project. Included as costs for MnCIFA financing:
- Interest rates: The rate of interest would be risk-adjusted spread over the base cost of funds (U.S. Treasuries). MnCIFA’s spread is based on our assessment of risk and notching factors, including job creation, benefits to environmental justice communities, and geographic diversity.
- Origination fee: A one-time fee to be paid at the time of first disbursement. (1.0% on loan amounts up to $2,000,000, plus 0.5% on any amount exceeding $2,000,000.)
Leveraging other financing sources
MnCIFA financing is required, by state law, to “leverage private investment in qualified projects, with the aim of achieving a high ratio of private to public money invested through funding mechanisms that support, enhance, and complement private lending and investment.”
To meet that statutory requirement, MnCIFA seeks to finance projects in which non-MnCIFA project funding sources comprise at least 50% of project costs and include, but are not limited to equity, debt, grants, and utility rebates.
In most cases, MnCIFA would not fund a project as sole financier.
Questions?
Send us an email: info.mncifa@state.mn.us.