Choosing the Right Financing 73the project can, in fact, be the most expensive alternative. So financing of-
ten becomes the best decision. Once you decide to finance the project and
identify a preferred financing vehicle, the next step is to evaluate poten-
tial funding sources.
Traditional funders include banks, commercial credit companies
leasing companies, insurance companies, brokerage houses, and ven-
dors. If you are dealing with a large financial institution, it is important to
contact the right department within that organization to obtain the best
pricing for your project. For example, when speaking to their bank, most
people start with their “regular banker,” who may limit their discussions
to loans. Keep in mind, however, that larger banks have a public finance
department where you will find tax-exempt lease purchasing, and some-
times even a bank-owned leasing company where you may structure a
special equipment lease. Large commercial credit companies may divide
the market by the size of the transaction—small ticket, middle market,
and large ticket. To further complicate matters, companies often define
their market divisions differently (i.e., under $25k for micro-ticket, $25k-
$500k for small ticket, $500k-$15 million for middle market, and over $15
million for large ticket*). If your project is $500,000, the small ticket and
middle-market groups may quote you two different prices, even though
they work for the same lender. Add the dimension of public-sector versus
private-sector finance, and you may get different pricing again. This is es-
pecially true in organizations where the sales staff’s compensation plan is
commission based, and they do not have a company lead-sharing policy
in place.
In almost every state where the electric industry has been restruc-
tured (deregulated), legislation has been passed to create a system ben-
efits charge (also know as a public benefits charge) that adds a defined
surcharge (fee) to the electricity bills. These fees are used to support ener-
gy-related projects that provide public benefits such as renewable energy,
energy efficiency, low-income customer programs, energy R&D, or other
related activities that may not be available in a competitive market. These
fees, usually a per-kilowatt (kWh) hour cost or a fixed charge, are charged
to all customers and cannot be bypassed. The amount of the charge varies
by state and accumulates in a fund, which is usually administered by the
state’s energy office or local utility.
*There is no industry standard, and individual lenders may set these break points differently
than this example.