Part III Confidence:
Confidence: Trust, belief, faith, credence, conviction. For a financial instrument to succeed, confidence is critical across the supply chain, but particularly for three key actors: the investor, the contractor and the consumer/borrower. What makes “confidence” so important along the supply chain of energy lending, and why do we at HB&C so often preach about the virtues of confidence to our clients?
- The investor (i.e. the capital provider) must be confident in the program that they are deploying capital into. Thus underwriting standards must be written to ensure money is deployed responsibly and data outlining the risk profile of any particular asset class is also important to help capital providers understand what their returns will be over a given time period.
2. The contractor must have confidence in the loan and that the process will not hamper their ability to connect with the customer, sell a product, and complete the install in a timely fashion.
3. The borrower must have confidence that the loan is being made by a reputable financial institution, that their EE investment will achieve their goals (typically comfort, energy savings and environment, in that order), and that they are getting a good deal on the loan.
If any party in the process lacks confidence, the deal-flow will suffer greatly. We are entering an age of much higher confidence in EE/RE financial instruments as their own asset class. Like a stone rolling down a hill, a growing body of data on EE/RE investment portfolios will provide momentum to the industry, and create a cycle of increasing confidence across the supply chain resulting in a complete market transformation. As more of these kinds of loan products become available, contractor interfaces will improve, and the more “normal” energy lending is to Joe and Jane homeowner- the more likely they are to rely on it to afford their next furnace replacement.
Check back soon for our next and final installment of “The Three C’s”- Convenience.