Pros and Cons of PACE: Financing for Upgrades

Energy-efficient upgrades always seem like a good idea — they’re better for the environment and better for your energy bills — but the upfront cost of putting those upgrades in place can leave businesses in limbo. Saving up for costly renovations can take years, but your energy bills remain high in the meantime. Many property owners find themselves seeking a solution that lets them start saving energy sooner. If this sounds like you or a client of yours, allow us to introduce a solution: the PACE Program

What is PACE?

The Property Assessed Clean Energy (PACE) Program encourages property owners to make energy-efficient upgrades through a government financing system. Rather than taking a traditional loan, property owners can apply for the government-run PACE Program, which provides full up-front financing for energy-efficient upgrades that are paid back through a voluntary assessment on their property tax bill over a period of 10-20 years. 


The PACE Program offers financing for projects that increase energy efficiency, renewable energy, or resilience against natural disasters. This includes building insulation, roof replacements, water conservation, HVAC systems, lighting upgrades, solar energy installation, stormwater management, and more. 

Pros of PACE Program Financing

Before beginning any large-scale renovations, it’s important to consider the pros and cons. National Tax Group’s tax experts will walk lenders through what you need to know in order to make an informed decision.  

No Out of Pocket Costs

While most loans only cover a portion of an energy efficiency project’s cost, PACE financing provides 100% of the funding. This leaves property owners with no upfront costs, freeing up funds for other projects or savings. The upfront cost barrier is a common deterrent for businesses with limited expenditure budgets, so this aspect of the PACE Program broadens the range of business owners who can take advantage of energy-efficient property upgrades. It also allows businesses to start projects immediately rather than waiting to save up funds, allowing them to start saving on their energy bills sooner.

Low, Fixed Interest Rates

Since PACE financing is repaid on the property tax bill, it offers lenders a high level of security. In return, lenders offer better interest rates and more favorable terms than other types of loans and financing, which results in a better deal for the property owner.

Long Payback Periods

Property owners have an average of 10-20 years to repay their PACE financing, not to exceed the average useful life of the upgrade. The long payback terms result in lower annual payments, and the savings from the energy efficient upgrade typically surpass the yearly cost. This allows property owners to partake in more comprehensive projects with deeper energy-saving effects than they would not be able to afford otherwise. 

Faster Access to Upgrade Benefits

PACE financing allows property owners to begin their upgrades immediately rather than saving up for long periods of time. This means owners can also start saving on their energy bills sooner, resulting in more accumulated energy bill savings over time. In addition, they won’t have to wait as long to enjoy the improved air quality and temperature regulation. If owners choose to make a resiliency upgrade, it also means that their building is protected against natural disasters sooner, which could be a critical point depending on their location (and luck).

Cons of PACE Program Financing

While PACE is a great opportunity for some, it’s not a perfect fit for everyone. Be sure to weigh the disadvantages of the PACE Program against the advantages before making a major decision.

Costs and Benefits

As with any investment, it’s important to consider the long-term costs and benefits of your energy-efficient property upgrade. PACE does not guarantee that your savings will exceed the costs of the upgrade — it only helps property owners and lenders work together to begin the upgrade, regardless of overall costs. Property owners must conduct their own research and decide for themselves if the upgrades are a worthwhile investment.    

Higher Total Interest

We discussed the PACE Program’s long payback periods in the “Pros” section, but this aspect can be a disadvantage as well. Longer payback periods mean more total interest over the course of a loan, and PACE is no exception. Before owners make their decision with a lender, consider whether a shorter-term, higher annual payment loan would be a better fit for your business’s budget in the long run.

Limited Availability

The PACE Program is conducted through state and local government, but not all areas participate. State governments have the power to enable PACE legislation, but local governments may or may not administer it. As of 2022, 38 state governments have enabled PACE legislation, but only 28 states have active PACE programs

How to Get Started with PACE Financing

If you decide that PACE financing is a good fit for you, it’s time to take the next step. 


First, find out if your state and local governments have enabled PACE legislation and have active programs in your area. If they do, you will need approval from a PACE administrator to secure financing. The administrator has to approve your planned property upgrade as well as the contractors and developers involved in the project. If your property has a mortgage, the administrator will also require consent from your mortgage lender before you can move forward. 


National Tax Group’s tax experts are experienced in navigating the PACE application and tax filing process. Our team has over 20 years of combined experience helping businesses find the most lucrative solutions to their commercial tax and financing needs. Before you take the next step, contact us today to learn how we can help your business save the most money on your property upgrade.

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