Since PACE funding is a relatively new financing option, you may wonder how it is different from mezzanine financing. They are similar in some ways, however there are some major differences between mezzanine financing and PACE funding. Because of this, it may make more sense to use one or the other to finance your project. Knowing what each entails will help you make a wise decision regarding how you finance your projects.
Mezzanine Financing
Mezzanine financing is typically used to expand established institutions. They are generally not utilized during the early stages of a company’s founding. This type of financing bases funding on property equity. If the borrower defaults on the loan, the lender can convert to an equity interest after senior lenders are paid.
For borrowers, mezzanine loan interest is tax deductible. If need be, the interest on the loan can generally be deferred should the company not be able to pay it. However, for these perks, the borrower gives up some control because they sacrifice equity to receive this type of financing.
PACE Funding
On the other hand, PACE funding can be used for new construction or for major renovations. PACE loans are based on the total project value and can finance as much as 30% of the value of the building you are constructing or renovating. However, repayment is done through property tax assessments. They offer a fixed rate, which is different than mezzanine financing. Additionally, should you sell your property, your PACE funding can transfer to the new owner. Overall, CPACE offers fewer risks than traditional mezzanine funding.
As your PACE lenders, Stonehill PACE can help you maximize your PACE proceeds without changing the scope of your project or adding on costly features. Our team has unparalleled experience in PACE financing, with knowledge of each state’s legislation and programs. We also work with you to help you through your new construction or major renovation projects. We simplify the process for you and maximize your returns. Call Stonehill PACE today at (678) 823-9313 to learn how we can help you finance your construction project. We look forward to the opportunity to work with you.