At this point, no one needs a primer on inflation. We know it’s currently historic, we know the Fed is addressing it by raising rates and tightening monetary policy, and we know the impact that has had on public markets.
The Inflation Reduction Act takes a different approach, by making investments that lower the cost of energy, transportation, healthcare, and prescription drugs for people feeling that wallet crunch a bit more every month.
It’s not a no-strings-attached giveaway, and people do need to put skin in the game to benefit – but it can offer both immediate and long-term quality of life improvements, and (like SOLRX) lets people participate in climate solutions without just donating or taking concessions.
Here’s a blueprint for your clients to maximize their return on the IRA. Note: most publications are posting the highest amount possible, which assumes the LMI income bracket. The below is for those that are earning 80-150% of AMI.
Immediate Rebates and Tax Incentives
The IRA offers benefits to everyone, like extending healthcare subsidies and capping drug costs – but most households can plan ahead to maximize rebates for upgrades that may have already been budgeted and save money over the long term:
Those incentives help with immediate needs, like aging home upgrades, relief at the gas pump, or a break from volatile and constantly-increasing utility bills – to the tune of $1800 annual savings on energy costs for each household – while creating solid jobs and cleaner air for everyone to breathe.
Your Strategy to Maximizing the Inflation Reduction Act
A tax credit for ongoing cost savings is compelling, and the impact can be maximized with some upfront investment and planning. We suggest your clients approach these rebates as follows:
Step 1 – Consider the switch to an electric car. Electric Vehicle rebate: the used car market is inflationary, so trade-in values are strong. This is a straightforward way to gain freedom from the gas pump. These are available now, no need to wait.
Step 2 – Planning home efficiency upgrades with a focus on electrification. These 30% tax rebates are per year. With some minor planning of major expenditures that fall into these categories, taxpayers could reap thousands in savings. If these plans focus on electrification, a change over to rooftop solar could lead to dramatic savings. As a lot of the Inflation Reduction Act needs to be converted into per-state policies, there is plenty of time to start the planning process.
Step 3 – Rooftop Solar. Properly sizing a rooftop solar system can offer utility savings on Day 1. With careful planning in Step 2 that gradually moves the home to a higher reliance on electric appliances with some efficiency upgrades, properly sizing the solar system will be much easier. The savings from a properly sized system help hedge against further inflation as the majority of energy needs are generated by the rooftop system.
Bottom Line – What Now?
Start the conversation. There is still a lot of paperwork that needs to be done between now and when these incentives will be available.
Where we invest:
The Fund seeks to allocate at least 80% of assets into securities and credit instruments related to the domestic solar power industry, that Finite believes offer attractive opportunities for risk-adjusted returns via capital appreciation and current income.
Debt and equity securities issued by Solar Originators and publicly traded U.S. Solar Companies provide liquidity to the Fund.
Finite Solar Finance Fund
The Fund seeks to achieve its investment objective by investing at least 80% of its managed assets in private, alternative lending-related securities issued in connection with solar financing (“Solar Finance Assets”). Solar Finance Assets include credit instruments related to the development, purchase or installation of solar energy equipment, the purchase and lease of renewably generated electricity, and securities of solar industry participants that the Adviser believes offer the potential for regular current yield.
The Finite Solar Finance Fund (the “Fund”) is a Delaware statutory trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as a non-diversified, closed-end management investment company. The Fund is continuously offering common Shares of beneficial interest (the “Shares”) and operates as an “interval fund.”
Some of the Risks of Investing in the Fund:
An investment in the Fund is speculative with a substantial risk of loss. Investors should consider their investment goals, time horizons and risk tolerance before investing in the Fund. An investment in the Fund is not appropriate for all investors, and the Fund is not intended to be a complete investment program. See “Risk Factors” within the Prospectus (link here) to read about the risks you should consider before buying the Fund’s Shares.
The Fund is newly organized, and its Shares are not listed on any securities exchange and no market for the Shares exists or is expected to develop. In addition, the Fund’s investments in Solar Assets will primarily be investments in Solar Loans and other alternative lending-related securities, which have special risks as described in more detail with the Prospectus (link here).
Before investing, you should read the Fund’s Prospectus regarding the Fund’s risks. These risks include, but are not limited to, those outlined below:
An investment in the Fund is not suitable for investors who need certainty about their ability to access all of the money they invest in the short term. You may not have access to the money you invest for an extended period of time.
The Fund has implemented a Share repurchase program, however, the Fund is not required to repurchase more than 5% of its outstanding Shares each quarter. Shares will not be redeemable at a Shareholder’s option nor will they be exchangeable for Shares of any other fund. Investors should therefore consider Shares of the Fund to be an illiquid investment. You should not expect to be able to sell your Shares (other than through the repurchase process), regardless of how the Fund performs.
Because you will be unable to sell your Shares at the time of your choosing or have them repurchased immediately, you will find it difficult to reduce your exposure on a timely basis during market volatility.
Although the Fund is not permitted to invest in loans that are of subprime quality at the time of investment, an investment in the Fund’s Shares should be considered speculative and involving a substantial degree of risk, including the risk of loss of investment. There can be no assurance that payments due on loans or other alternative lending-related securities in which the Fund will invest will be made.
At any given time, the Fund’s portfolio may be substantially illiquid and subject to increased credit and default risk. The Shares therefore should be purchased only by investors who could afford the loss of the entire amount of their investment.
The Fund intends to accrue and declare dividends daily and distribute them on a quarterly basis; however, the amount of distributions that the Fund may pay, if any, is uncertain. The Fund may pay distributions in significant part from sources that may not be available in the future and that are unrelated to the Fund’s performance, such as from offering proceeds, and borrowings. A portion or all of any distribution of the Fund may consist of a return of capital and may result in potentially adverse tax consequences to the Fund or its shareholders.
The Fund’s distribution policy could result in a return of capital, resulting in less of a shareholder’s assets being invested in the Fund and, over time, potentially causing the Fund’s expense ratio to increase.
The distribution policy also may cause the Fund to sell a security at a time it would not otherwise do so.
If the borrower of the loan or other alternative lending-related security in which the Fund invests is unable to make its payments on a loan, the Fund may be greatly limited in its ability to recover any outstanding principal and interest due under such loan, as (among other reasons) the Fund may not have direct recourse against the borrower or may otherwise be limited in its ability to directly enforce its rights under the loan, whether through the borrower or the platform through which such loan was originated, the loan may be unsecured or undercollateralized, and/or it may be impracticable to commence a legal proceeding against the defaulting borrower.
Substantially all of the Solar Assets in which the Fund invests will not be guaranteed or insured by a third party or will not be backed by any governmental authority.
Prospective borrowers supply a variety of information regarding income, occupation and employment status (as applicable) to the alternative lending platforms that may originate or source loans. As a general matter, platforms do not verify the majority of this information, which may be incomplete, inaccurate, false or misleading. Prospective borrowers may misrepresent any of the information they provide to the platforms.
Under the 1940 Act, the Fund may utilize leverage through the issuance of preferred stock in an amount up to 50% of its total assets and/or through borrowings and/or the issuance of notes or debt securities in an aggregate amount of up to 33 1/3% of its total assets which could magnify losses as well as gains.. There can be no assurance that any leveraging strategy the Fund employs will be successful during any period in which it is employed.
The alternative energy industry can be significantly affected by obsolescence of existing technology, short product lifecycles, falling prices and profits, competition from new market entrants and general economic conditions. This industry can also be significantly affected by fluctuations in energy prices and supply and demand of alternative energy fuels, energy conservation, the success of exploration projects, tax incentives, subsidies and other government regulations and policies” (see prospectus “Investment Strategy Risks”).
Neither the SEC nor any state securities commission has approved or disapproved of these securities or determined if this Prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The Finite Solar Finance Fund is distributed by Foreside Fund Services, LLC. Finite Management, LLC and Foreside Fund Services, LLC are not affiliated.