Coupon Rate: 5.00% per year, interest paid quarterly Maturity Length: 5 years (9/17/2025)
Climate Action Investment Notes
Offered in Principal Incremental Amounts of $1,000
Target Offering Amount of $10,000 to a Maximum Offering Amount of $250,000
10 to 250 Unsecured Subordinated Debt Notes
Full details of the offering are available in the Form C filed on the Securities and Exchange Commission's EDGAR Database.
The National Energy Improvement Fund ("NEIF"), founded in 2017 as a benefit corporation lending institution, has a lending heritage dating to 1947 (AFC First). It’s mission is to increase the affordability of energy efficiency and resilience improvements in homes and commercial properties.
Led by energy financing pioneers, Peter Krajsa and Matthew Brown, and a team responsible for over $800 million in innovative energy financing programs, NEIF is currently the nation’s only Certified B Corporation® specialized energy efficiency and resilience lender, meeting the highest standards of social & environmental performance, public transparency, and legal accountability. It was named a U.S. Department of Energy Home Improvement Expert Partner in 2019.
NEIF is focused on four strategic areas:
Climate — NEIF finances energy efficiency improvements that reduce energy usage and the carbon footprint.
Affordability — NEIF financing makes energy and resilience more affordable for homeowners and businesses of all sizes and income levels with additional focus on low and moderate income borrowers.
Resilience — NEIF provides specialty financing and insurance programs for buildings in high impact weather regions.
Business and Job Development — NEIF accelerates contractor growth and employee development with training, products and programs.
NEIF offers commercial financing related programs nationally and residential lending programs in 22 states in the Northeast, Mid-Atlantic, Southeast, Gulf Coast, and California. NEIF is servicing almost $20 million in loans across nearly 5,000 completed energy efficiency projects, and hosts a contractor network of over 750 approved companies as of August 2020.
In 2019, NEIF expanded its administrative program contracts for Efficiency Maine, Xcel Energy, AEP Ohio, Rocky Mountain Power, and Eversource as well as expanded programs and partners such as Pennsylvania Treasury, Efficiency Maine, and the Connecticut Green Bank.
NEIF successfully raised $4 million in first stage capital from energy funds and individuals with an investment by management of over $1.25 million. In May 2020, NEIF acquired and integrated MyStrongHome, a resiliency-based lending and insurance benefit corporation operating in the Southeast U.S.
NEIF’s products and services are focused in 4 key areas:
Lending to consumer and commercial customers — Loan origination and servicing for efficient heating, ventilitation, and air conditioning (HVAC), windows, roofs, lighting, battery storage, and other efficiency and resiliency upgrades.
Bridge financing for contractors — Advance funding programs to cover contractor short-term capital needs with rebate advance payments, working capital, and related funding.
Program administration services — Portal technology, loan servicing, and origination for governments, utility, and other sponsors and their contractor networks.
Property Insurance based on resilience — Insurance services for homeowners, which provide reduced premiums after resiliency upgrades such as roofs that are fortified against hurricane-force winds.
Strong credit — The average credit score for all energy and resiliency funded loans to date is 737.
Strong repayment performance — 60-day delinquency for all standard NEIF loans is less than 1.0% with no losses to date.
Diversified projects — For the over 4,000 residential projects funded by NEIF to date, 64% have been for heating, cooling and related improvements, and 36% have been for insulation and other energy and resiliency measures.
Funding spread across diverse income demographics — For all funded loans by NEIF to date, over 50% have been for low to moderate income.
Use of Proceeds
<70% Program expansion including personnel, licensing and operating capital
Expand reach to the new states in which it is newly licensed to lend including the Southeast U.S., Gulf Coast and California.
Launch the state-subsidized Keystone HELP residential efficiency program with Pennsylvania Treasury.
Integrate and grow the recently acquired MyStrongHome platform for hurricane and weather resilient improvements, including expanding the property and casualty insurance division, NEIF-MSH Insurance LLC.
Broaden the reach of commercial lending, finalizing and implementing NEIF proprietary commercial lending platform.
Complete development of a state-of-the-art residential efficiency finance portal and in-home contractor sales tools leveraging NEIF’s commercial portal technology.
Develop an integrated energy and emissions reduction tracking system for funded projects.
<10% Marketing and program development
Launch new digital marketing initiatives to attract new contractors, and new digital advertising, and print portals for contractors.
Finalize and launch a new residential HVAC leasing program in cooperation with national distributor partners.
<10% Pilot portfolio loan programs
Establish test programs with expanded credit criteria for low and moderate income borrowers.
Steady, recurring revenue — Business model combines revenue and transaction fees with a focus on loan balance growth to build the stream of business.
Growth — NEIF is currently servicing almost $20 million in loans, projected to break-even at $75 million in 2021.
Team — Decades of experience in energy, lending, and compliance.
Management is invested — $4 million raised with $1.25 million from management.
Transparent impact — Publish an annual NEIF Benefit Report for investors, detailing NEIF's impact on energy and carbon savings from efficiency improvements financed, the broadening of the affordability of these improvements to all classes of income, small business growth among others.
NEIF became operational in 2018, with planned operating losses during the startup and growth phase through 2021, when NEIF is, based on information currently available as well as certain assumptions from the management team, projected to achieve positive returns when total loans being serviced approach $75 million.
NEIF has raised over $4 million with $1.25 million from management. To support its growth, NEIF is currently seeking an additional $3 million over the next 2 years by adding to their existing equity Preferred Units.
This section contains certain forward-looking financial statements and/or projections. Actual results could differ materially from those projected in such forward-looking statements and projections as a result of various factors, including the risks typically associated with this type of enterprise and changes in the market. NEIF undertakes no obligation to publicly release the result of any revisions to these forward-looking statements and projections that may be made to reflect events or circumstances that occur after the date of this offering statement or to reflect the occurrence of any unanticipated events.
NEIF originates and sells loans into pre-committed capital pools. NEIF retains ownership for the life of the loan, of a loan servicing spread for account management, payment processing, collections and reporting and a program management spread for contractor management, training, improvement qualification and reporting. These spreads range from 1.5% to 4% of the loan portfolio depending on level of services.
NEIF also receives monthly retainers from utilities and other programs. Services include management of lending activities for a utility’s commercial and small business initiatives and range from $1,000 monthly to $5,000 monthly depending on the level of service. NEIF provides premium subscription services to contractors for preferred access to sales tools, NEIF’s proprietary financing portals and additional marketing services.
Financial Plan and Projections.
Peter J. Krajsa, Co-Chair and Founder, Managing Member
Peter Krajsa is a recognized innovator in energy efficiency finance for over two decades. Prior to NEIF, he headed channel business develo..
A crowdfunding investment involves risk.
You should not invest anything you cannot lose entirely.
Full details of the offering are available in the Form C filed on the Securities and Exchange Commision's EDGAR Database.
You should not invest any funds in this offering unless you can afford to lose your entire investment. In making an investment decision, investors must rely on their own examination of the issuer and the terms of the offering, including the merits and risks involved. Investors should carefully read the Issuer’s Offering Materials, including the Form C and this Offering Page. Investors should seek advice from a financial advisor and ask questions, if any, directly to the Company on the Forum Section on this Page. Raise Green does not provide financial, tax, accounting, or legal advice, and does not recommend any particular investment. Investors must take into consideration their own particular financial circumstances prior to investing.
These securities have not been recommended or approved by any federal or state securities commission or regulatory authority. Furthermore, these authorities have not passed upon the accuracy or adequacy of this document. The U.S. Securities and Exchange Commission does not pass upon the merits of any securities offered or the terms of the offering, nor does it pass upon the accuracy or completeness of any offering document or literature. These securities are offered under an exemption from registration; however, the U.S. Securities and Exchange Commission has not made an independent determination that these securities are exempt from registration.
Limited Operating History
The Company and its Business (defined below) are continuing to be developed, in part, with the proceeds of the Offering. The Company, which was organized in 2017 and began to operate in 2018, has a limited history of operations or earnings.
As used herein, the term “Business” shall refer to operating as a “Benefit Company” by engaging in certain activities for the general public benefit, including promoting energy savings by increasing and improving access for affordable financing of energy efficiency, and resiliency improvements for consumers and business. As used herein, “Benefit Company” shall generally refer to an entity that: (i) has an expanded purpose beyond maximizing “share value” to explicitly include general and/or specific public benefits; (ii) is required to consider and balance the impact of its actions not only on its equity holders but also on the general public; and (iii) is required to make available to the public certain benefit reports that assess the entity’s overall social and environmental performance. The Company operates as a Benefit Company, which means, among other items, that the Company may consider factors other than maximizing profit and “member equity” when making business decisions, including, but not limited to, general or specific public benefits. Any such decisions may adversely affect the profitability of the Company and/or the ability of investors to realize a return on their investments.
The Company faces significant competition
Other persons and entities in the geographic area to be served by the Company are currently engaged in businesses or providing products or services that are similar to, or competitive with, the Business of the Company (a “Competitive Business”). In the future, additional persons or entities may also become engaged in Competitive Business activities in the geographical area of the Business. The Company is operating in an extremely competitive lending environment. In addition, future competitors may enter the Company’s line of business. The Company’s competitors may offer services which the Company does not offer or plan to offer, and may have substantially greater resources, name recognition and market presence that benefit them in attracting business. Such competition may adversely impact the profitability of the Company.
Lack of energy efficiency and resilience financing/loan transactions
The Company’s revenue will be closely related to the number of energy efficiency and resiliency financing/loan transactions that it participates in. A lack of financing transactions, or defaults under any such financing transactions, would have a direct adverse impact on the ability of the Company to meet its obligations.
General economic conditions may have a significant impact on the Company’s financial condition and operating results
The success of the Company depends in large part on general economic conditions. Adverse changes in the economy could reduce the growth rate of the Company, impair the Company’s ability to collect loans, and generally affect the Company’s financial condition and results of operations. Any sustained economic downtown, whether resulting from the current COVID-19 pandemic or otherwise, could: (i) reduce the demand for the Company’s services; (ii) lead to increased instances of loan defaults; and/or (iii) influence other factors which could negatively impact revenues. The Company will primarily provide unsecured energy efficiency loans for residential projects as well as brokering both unsecured and secured financing for commercial projects. The Company’s unsecured products are largely based on the Fannie Mae underwriting standards and performance characteristics which historically provided annualized loss rates of less than 1%, far lower than traditional unsecured lending. The risks associated with unsecured loan originations include, without limitation, the lack of collateral with value to offset credit exposure in a loan default scenario, credit quality, and access to capital. The Company focuses on these types of programs because of market expectations, point-of-purchase loan delivery requirements, and the transaction speed necessary for equipment replacement projects; i.e., heat pump replacement in winter where a customer has no heat.
The Company’s revenue stream and ability to generate new programs is dependent on its ability to generate a high quality loan portfolio
While the credit risk associated with these loans generally resides with the capital source, it is the Company’s business risk that loan performance drives revenue through its program management fee. A significant increase in loan defaults would have a negative impact on the Company, its profitability and its ability to pay preferred stock dividends. Loan quality is directly impacted by underwriting standards applied by the Company in approving borrowers for financing of energy efficiency and resiliency improvements. Weakening these underwriting standards could lead to a higher level of defaults than has been the case historically, which could impact the Company’s profitability and its ability to pay any distributions to Members. The Company takes no credit risk in its commercial finance brokerage activities.
The Company is dependent on outside capital sources to provide permanent financing for the loans it generates. An economic downturn could impact capital markets by making capital more expensive or unavailable, thus interrupting the Company’s business model and impacting its ability to operate profitably or impacting its ability to pay interest and principal on the Notes. The Company relies on servicing rights, and forecasts expected revenue streams that may not result as expected. An adverse impact on the Company’s retained servicing rights would have an adverse impact on future revenue streams and impact the Company’s ability to operate profitably and pay interest and principal on the Notes.
Without limiting the foregoing, the Company estimates the value of its servicing rights on an annual basis, taking into account underlying characteristics of the loans it is servicing, including, without limitation, prepayment speeds, default rates, cost to service loans, and an implied present value factor to state the current value of expected future revenue streams. Any material change in these forecasts (or the actual results of such forecasts) could result in an adverse impact on the Company’s: (i) retained servicing rights; (ii) future revenue streams or available cash; and/or (iii) the Company’s ability to operate profitably and/or satisfy its obligations (including, without limitation, any obligations under the Notes).
Unsecured Fixed Income Note Risk
Fixed Income has risk
With unsecured fixed income securities (such as the Notes) there is a promise by the Company to pay you interest and your principal investment back in the future (pursuant to the applicable terms and conditions of such security). This is unlike an equity “common stock” investment where there is no promise by the Company to pay you a set amount. However, while there is this promise, if a Company goes into bankruptcy, becomes insolvent, or otherwise is unable to pay its debts as they become due, then the Company may not be able to satisfy its payment obligations under the Note, and an investor may therefore either suffer a loss of their investment or not realize their anticipated return on their investment. In addition, because the amounts payable on the Notes are fixed amounts, a Note holder does not have the ability to participate in the upside potential that an equity investor does if the Company is very successful.
The Notes are unsecured and subordinated to ALL other present, and potentially future, obligations of the Company except for the Class C Units and the Class D Units of the Company. As used herein, the term, “unsecured” generally means that there is no specific collateral to which investors would have recourse to in the event that the Company is unable to meet its payment obligations but rather is a general obligation of the business. Without limiting the foregoing and for the avoidance of doubt, the payment obligations and/or indebtedness evidenced by the Notes, including the principal and interest due and payable thereunder, shall be subordinate and junior in right of payment to the prior payment in full of: (i) all existing and future payments owing to any existing, and potentially future, classes of equity of the Company (including, without limitation, the Class A Units, the Class B Units, and the Class E Units) except for the already issued Climate Action Investment Notes, Class C Units and Class D Units; and (ii) all existing claims of creditors of the Company, whether now outstanding or subsequently created, assumed or incurred (collectively, “Senior Obligations”), which shall consist of: (a) the principal of (and premium, if any) and interest, if any, on all indebtedness of the Company for money borrowed from third-parties, including, but not limited to, all obligations to the Company’s general and secured creditors; (b) any deferred obligations of the Company for the payment of the purchase price of property or assets acquired by the Company; (c) all obligations, contingent or otherwise, of the Company in respect of any letters of credit, bankers’ acceptances, security purchase facilities and similar credit transactions; (d) any capital lease obligations of the Company; (e) all obligations of the Company in respect of interest rate swap, cap or other similar agreements, interest rate future or option contracts, currency swap agreements, currency future or option contracts, commodity contracts and other similar arrangements; (f) all obligations of the type referred to in Clauses (a) through (e) of other persons for the payment of which the Company is responsible or liable as obligor, guarantor or otherwise; (g) all obligations of the types referred to in Clauses (a) through (f) of other persons secured by a lien on any property or asset of the Company; and (h) any and all amendments, renewals, extensions, modifications, and deferrals of the indebtedness and obligations of the type referred to in Clauses (a) through (g); except that the term “Senior Obligations” does not include: (i) the Notes, (ii) any obligation that by its terms expressly is junior to, or ranks equally in right of payment with, the Notes. The Notes are not secured by any assets of the Company and are not covered by a guarantee from any principals, subsidiaries or affiliates of the Company.
While the Company believes that the interest rate that is applicable to the Notes is generally reflective of market terms for an investment of this nature, there is currently a very limited market of comparable offerings to reference. Unlike listed companies that are valued publicly through market-driven trading, the valuation of securities of private companies, especially startups or in early stages, is difficult.
Interest rate risk
Interests fluctuate over time and may go up or go down. If interest rates go up (for example from 5% to 6% for a similar investment) in the future, your investment will maintain its original lower rate. Subject to any applicable restrictions on the transfer of such Notes, if an investor desires to sell their Note to someone else, a third-party, such third-party may require a discount from your, the investor’s, original investment amount, which would cause them to potentially realize a loss on their investment.
The Notes, at the option of the Company, can be redeemed at any time with 30 days’ notice. The Company is obligated to give you your initial principal investment back plus any interest that is accrued. However, when you go to reinvest your money, current interest rates may be lower and your new investment will carry a lower interest rate.
General Crowdfunding Risks
Investments in startups and early-stage ventures are speculative and these enterprises can fail. Unlike an investment in a mature business where there is a track record of revenue and income, the success of a startup or early-stage venture often relies on the development of a new product or service that may or may not find a market. You should be able to afford and be prepared to lose your entire investment.
Pursuant to state and federal securities laws, you will be limited in your ability to resell your investment for the first year and may need to hold your investment for an indefinite period of time. Unlike investing in companies listed on a stock exchange where you can quickly and easily trade securities on a market, you may have to locate an interested buyer when you do seek to resell your crowdfunded investment.
Once you make an investment commitment for a crowdfunding offering, you will be committed to make that investment (unless you cancel your commitment within a specified period of time).
The Company may disclose only limited information about the Company, its business plan, the offering, and its anticipated use of proceeds, among other things. An early-stage company may be able to provide only limited information about its business plan and operations because it may not have fully developed operations or a long history to provide more disclosure. The Company is also only obligated to file information annually regarding its business, including financial statements, and certain companies may not be required to provide annual reports after the first 12 months. A publicly listed company, in contrast, is required to file annual and quarterly reports and promptly disclose certain events—continuing disclosure that you can use to evaluate the status of your investment. In contrast, you may have only limited continuing disclosure about your crowdfunding investment.
Investment in personnel
An early-stage investment is also an investment in the entrepreneur or management of the Company. Being able to execute on the business plan is often an important factor in whether the business is viable and successful. You should also be aware that a portion of your investment may fund the compensation of the company’s employees, including its management. You should carefully review any disclosure regarding the company’s use of proceeds.
Possibility of fraud
As with other investments, there is no guarantee that crowdfunding investments will be immune from fraud.
Lack of professional guidance
Many successful companies partially attribute their early success to the guidance of professional early-stage investors (e.g., angel investors and venture capital firms). These investors often negotiate for seats on the company’s board of directors and play an important role through their resources, contacts and experience in assisting early-stage companies in executing on their business plans. An early-stage company primarily financed through crowdfunding may not have the benefit of such professional investors.