06 Nov So you wanna Pee Pee, Aye? (Part 2)
Last month we covered off the general structure of a PPA. If you didn’t get a chance to read it, you can find it here.
This month we go over how to offer a PPA, at least financially anyway. I won’t go into all the contractual stuff with the customer.
The main problem with a PPA is that there is only a certain amount of installations you can complete on your own before you start having cash flow problems.
Unless your uber rich. Which some companies (they who shall not be named) are, and as such are absolutely flooding the market with PPAs.
So to have any long term success you’ll need cash (lots of it). And there’s two ways of getting it.
Debt & Equity.
You’ll need to get a revolving line of credit from a bank.
This is a product where you can pull money out of when completing an install, and put money back into when a customer pays their electricity bill.
Works sort of like the redraw facility on your home loan.
But no bank is going to go for this type of loan unless it’s a big juicy deal. $1mil minimum.
Now in the banks eyes your essentially lending money to customers. Because you are determining which customers will honour your contract. Or in other words exactly what a bank does.
So no matter what, they don’t trust your judgement. They want security that if you fail, they can sell an asset to get their money back.
And the only asset they feel comfortable with is, property. Which no one wants to put up.
This is easy. Find a rich fella who trusts your business plan.
Don’t look at me, I don’t know anyone.