[npatten]

It's all regulated by the Securities and Exchange Commission. So we're actually selling securities of the debt owed to us by the borrower to the crowd investors.

A lot of the work we've done over the past year is navigating the regulatory labyrinth required to offer securities to 'non-accredited' investors. (i.e. everyone who doesn't have a million bucks in the bank)

[yetanotherphd]

Wow, I'm impressed. Before you replied, I would have guessed you found a loophole to avoid SEC regulation.

I haven't read enough to judge how beneficial the particular loans you broker are, but I think that just showing that it's possible to crowdsource investment this way is a great achievement.

[npatten]

We've worked really hard to make sure it's a significant benefit to everyone involved. Investors can expected yields between 4-10% with durations between 1-10 years. While borrows save money even in month 1. They only pay back a portion of the savings they earn from their reduced energy bill. In as little as 1 year they'll be keeping all the savings.

[aray]

What if the pricing tiers for energy change, and reduce the savings (either by reducing the cost for the original configuration more than the new one, or increasing the cost for the new configuration more than the old one)?

[npatten]

Changes in utility rates (both in absolute terms and in pricing tiers) are always a risk to the performance of energy efficiency upgrades. Spark leases are designed with a shared savings "buffer" to protect against this and other changes to expected savings. For any Spark lease, monthly repayments are set to between 95% and 60% of the savings that the upgrade is expected to achieve, allowing the customer to absorb some reduction in savings while remaining cash flow positive.

Structurally, Spark leases and our payouts to investors are not affected by changing prices or fluctuations in savings unless it results in default. Our leases are designed to be cash flow positive in all but the most unexpectedly poor performance scenarios, and we vet the methodologies used by our contractor partners to ensure that savings estimates adhere to accepted standards. Spark lease terms are also relatively short, with terms that typically fall in the 3-6 year range, reducing the risk of major shifts in utility prices during that time. Ultimately, however, a Spark lease is not a guarantee of performance, and the lease still requires repayment even if performance lags in a given month.