Q&A with Sunstone Credit

When homeowners go solar, there are a few different ways to finance your project: you can pay with cash, take out a loan, or choose to lease your system. When businesses or nonprofits go solar, cash often isn't an option given the size of the investment, so having an attractive range of financing options becomes even more important. And often, the only businesses that can access financing are larger organizations, leaving small-to-midsize businesses struggling to find a reasonable solar financing solution. Sunstone Credit has solved that gap by, in their own words, providing "flexible financing solutions for businesses of all sizes," making it easier for your business–or nonprofit!–to install a solar system. We sat down with Sunstone Credit to learn more about their background, offerings, and advice for businesses looking to go solar.

[E.S.] Tell us more about Sunstone – when, where, and why were you founded? What are the backgrounds of your founders?

​​[S.C.] Sunstone was founded to provide financing for non-investment-rated businesses looking to install and own solar. In many ways, small commercial solar is the final frontier for the American solar industry. Sunstone partners with best-in-class developer partners to provide loan products built for commercial solar and a simple, rapid underwriting process.

Our founding team's experience is tightly wrapped up in why we started the company. Our founders have started solar installation and development companies and faced the difficulties that come with trying to help small businesses go solar. We've experienced first-hand how hard it is for businesses to get financing that matches their needs and how hard it is for developers to offer solar solutions to this market without a financing option. This experience was an essential part of the motivation to found Sunstone.

By combining this solar expertise and experience with founders who have spent decades in capital markets and commercial underwriting, Sunstone has assembled the right team to bring a new approach to commercial solar finance. Developer partners and borrowers will benefit from this new approach by being able to access dedicated solar loan products with terms ranging from five to 20 years and multiple reamortization options, a "collateral-light" approach that preserves credit lines and minimizes opportunity costs, and a simple, quick-to-fill-out digital application. Sunstone is helping drive a new way to sell and finance commercial solar.

[E.S.] What's your company's mission?

[S.C.] The Sunstone mission is to democratize access to solar for small and medium-sized businesses. For many of us on the Sunstone team, addressing climate change and putting our planet on a better footing has been an important part of our professional mission for years. Reducing greenhouse gas emissions will require a broad transition to renewable energy, a transition that has been gaining commercial and policy momentum for over a decade.

In our experience, the solar industry has been very successful at providing sophisticated vehicles for utility-scale solar or investment-grade off-takers and efficient platforms for homeowners who need financing for their residential systems. The segment that has been underserved by the rapidly expanding solar industry is the small and medium-sized businesses across the U.S. This has to change if the U.S. is to meet its climate goals and stave off the worst effects of climate change. Sunstone Credit emerged from this belief and our experience in the solar industry.

[E.S.] Why did you decide to focus on the commercial solar industry?

[S.C.] It seemed to us that a lack of financing was holding back an extremely important segment of the solar market and, in turn, holding back progress on the renewable energy transition overall.

Solar offers a uniquely powerful value proposition for small businesses. By assisting these businesses in their transition to owning their own power and reducing overhead, we're helping reinforce an important part of the American economy. When a business saves money, those savings are reinvested in the business or the community, making their impact even more significant. We believe the vast majority of businesses will receive more economic return from owning their own solar system (as opposed to leasing or purchasing power through a PPA); they just need the tools to do it easily.

[ES] Tell us about the loans you offer. What term lengths and rates do you offer? Are there different types of loans?

[SC] Sunstone's loans are built for commercial solar. Our minimum loan size is $50,000, and our maximum loan size is $6 million. (EnergySage note: That means loans for systems ranging from 20 kilowatts or so to 3-5 megawatts–meaning Sunstone can provide financing for nearly any business's solar needs.) Loan terms range from 5 to 20 years, and interest rates vary from 2.99% to 6.99%. All of our interest rates are fixed–no surprise changes to your monthly payments down the line–and we do not typically require a personal guarantee. Our goal is to provide a business-to-business loan for 100% of the system cost, allowing that business to go solar as easily as possible with no upfront cost.

Sunstone offers two types of loans. The first is a standard loan. The second allows for a business to have a lower monthly payment from month one by requiring a "special payment" of 26% of the loan amount before month 18. The idea behind this loan is to give a business lower monthly payments in exchange for committing to reinvesting their tax savings from the federal investment tax credit (ITC) into the solar system.

[ES] Who can and should apply for Sunstone loans?

[SC] Sunstone's underwriting process is designed to work with businesses of all types and sizes. Sunstone is also adept at working with special purpose vehicles and other unique ownership structures. Whether the company is a holding company and a part of a larger real-estate portfolio or a developer looking to own a system and receive payments from an off-taker, Sunstone can provide a scalable debt strategy. Finally, Sunstone can lend to non-profits looking to install solar.

[ES] How does the loan application work for interested businesses or nonprofits?

[SC] The application is initiated by the developer or installer and is completed entirely online. The potential borrower will set a password and then log in to their account to complete the application. The questions we ask and our documentation requirements are extremely similar to a standard commercial loan application, and once completed, the information is securely stored in our system so we can begin underwriting. A typical application, once complete and submitted, can receive a decision in five business days.

[ES] How should businesses think about their potential monthly payments?

[SC] A business that is producing its own electricity can think of its monthly payments as replacing its electric bill, effectively swapping overhead for capital investment. With longer-term loans or in places where commercial electric rates are high, businesses should be able to replace their utility bills with a smaller monthly loan payment for the same amount of electricity.

Of course, financing also allows a business to preserve cash and pay for its infrastructure investment over time as opposed to in one lump sum. In today's economic climate, preserving cash is a top priority for businesses, and a loan of any length can help a business maintain an operating cushion while making a long-term investment to reduce overhead. So, even if a business has the cash on hand to pay for a solar panel system upfront, financing the system is still a solid option.

[ES] What risks should businesses be aware of when signing a Sunstone loan?

[SC] Businesses should work with reputable, knowledgeable developers to scope, design, and install their solar energy systems. Sunstone vets every installer that has access to their loans and also reviews each project they finance, increasing the amount of diligence on a project and giving business borrowers greater confidence in their investment.

[ES] Can businesses still claim the solar tax credit with a Sunstone loan?

[SC] With a Sunstone loan, all the benefits of installing solar accrue to the business: not only the solar tax credit but also bonus depreciation and any state or local incentives will accrue to the business. Owning a solar system and taking direct advantage of solar incentives is frequently the most efficient way to go solar and provides the highest lifetime return on investment (ROI).

[ES] In your opinion, why should a business choose a Sunstone loan over other solar financing options?

[SC] Why have someone else monetize your roof when you can monetize it yourself? By choosing to own a solar system, a business is reducing operating costs, increasing net operating income, and increasing the value of their property. Sunstone's loan products make the process of financing the system simple and effective while providing unique features that allow a business to easily find the right loan product and maximize the benefits of solar.

[ES] What's your advice for businesses deciding between a solar loan and a lease or PPA?

[SC] PPAs are an important vehicle for many institutions looking to install solar, but a simple loan product designed for solar is going to provide optimal returns to most businesses. If your business can utilize the tax credit and depreciation benefits, owning the solar system is going to provide the best ROI. With Sunstone's financing products, you can have no out-of-pocket cost and be cash-flow positive from day one, providing essentially the same benefits as a PPA but with a higher rate of return.

Best of all, the savings generated from solar will last for over 30 years, increasing your business' cash flow. And since you own the system, should you sell your property, your net operating income will be higher, leading to a higher valuation at the sale.

At EnergySage, we don't just help homeowners go solar – we help businesses explore their solar options too! When you sign up for a free account on the EnergySage Marketplace, we'll provide you with an initial estimate of how much solar you need for your business, how much it might cost, and how much you can save with solar–including estimated loan payments through Sunstone Credit financing. If it looks like the right investment for you, then we'll gather custom quotes from multiple solar companies in your area and help you decide which is right for your business.