Securing the right development capital, on the right terms, can make or break a clean energy or manufacturing project. As just one example, lenders often cover up to 80–90% of total project costs through construction and bridge loans, so meeting their expectations determines whether a project breaks ground or remains on hold.
Before committing capital, lenders scrutinize every detail, from technology type and contracts to permits and financials. Even strong projects can stumble during underwriting if there are unresolved risks or gaps in documentation.
To secure financing more efficiently and on better terms, developers need to understand how lenders evaluate opportunities. This article breaks down the core criteria shaping how lenders evaluate and make financing decisions and what it takes for a project to stand out.
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Above all else, lenders underwrite for durability. Their priority is minimizing downside risk and ensuring the project can generate stable, predictable cash flows over time. Critically, that assessment dictates the project's ultimate cost of capital, which is often expressed as a spread over the Secured Overnight Financing Rate (SOFR).
While each lender has its own methodology for evaluating projects, six factors consistently shape credit decisions and pricing in clean energy project finance:
What: Lenders assess whether the developer’s core technology is proven and structured to perform in the real world.
Why: Lenders need confidence that the project will deliver as forecasted, which is why proven technologies typically attract broader support. Crux data shows more than 90% of investors are willing to fund solar and storage projects from the pre-NTP (notice to proceed) stage to term loan/long-term financing, while interest in emerging technologies such as advanced manufacturing is more limited (30–50%). This risk gap drives pricing: utility-scale solar typically sees spreads of SOFR + 175–300 bps, compared to SOFR + 400–1,000 bps for emerging technology types.
How developers can win:
What: Lenders assess whether a project’s environmental footprint has been properly evaluated and permitted, and whether the developer can manage local, state, and federal compliance obligations.
Why: Environmental permitting is a major checkpoint that can delay or derail project timelines. Projects with unresolved environmental issues or opposition from local stakeholders are seen as higher risk.
How developers can win:
What: Lenders evaluate a developer’s financial strength, execution history, and equity commitment.
Why: Clean energy projects are complex and face execution risk, so lenders want assurance that the sponsor can manage setbacks and deliver through to commercial operation. A sponsor’s track record, financial strength, and demonstrated commitment are key signals that the project has experienced leadership and is ready for capital deployment.
How developers can win:
What: Lenders want to know the strength and credibility of a project’s contracted revenue streams, including power purchase agreements (PPAs), capacity payments, or storage incentives. According to the American Council on Renewable Energy (ACORE), long-term offtake agreements are an essential element for enabling project financing and development.
Why: Lenders and investors strongly prefer fully contracted projects, where long-term offtake agreements reduce revenue uncertainty and strengthen repayment confidence. Crux analysis shows 83% of investors are willing to consider fully contracted projects, compared to just 25% for partially contracted ones. This trend is consistent across both lending and tax equity markets.
Lender willingness to invest in partially and fully contracted projects
How developers can win:
What: For construction loans, lenders require evidence that a project is ready to break ground, including signed contracts and a realistic timeline.
Why: Construction is one of the riskiest phases of a project. Cost overruns, permitting issues, supply chain delays, or weak contractor performance can all derail execution and jeopardize repayment timelines. Projects that experience delays begin operations an average of 15 months late, making lenders especially cautious. They want proof that the developer has locked in major agreements and secured permits to deliver the project on time and on budget.
How developers can win:
What: Lenders review the project’s financial model to assess bankability, including projected cash flows, debt coverage, return metrics, and the structure of debt, equity, and tax credit components.
Why: The financial model ties together a project’s technology, revenue, construction, and capital structure, giving lenders a clear view of risk. Inconsistent inputs or vague assumptions raise red flags, but so does poor presentation. A detailed confidential information memorandum (CIM) and standardized materials signal transaction readiness.
Overall, a well-structured capital stack can improve terms.
How developers can win:
Even strong projects can struggle to secure financing if key details are missing or unclear. Avoid these common mistakes to expedite lender review and secure more competitive term sheets.
Securing capital is one of the biggest hurdles clean energy developers face. Lenders look for data-based, independently verified reassurances that a project will be able to service its debt over the long term.
To earn financing on favorable terms, developers must show that their deals are well-structured and ready to execute. The six criteria above outline the documentation, third-party validation, and financial signals that lenders expect to see. By preparing a complete, lender-aligned package, developers can boost their chances of securing funding and improve their spread over SOFR, which directly affects project returns.
Finding the right lender matters as much as preparation. A financing partner with experience in your specific technology or market may view your project as lower risk and offer more flexible terms, including higher leverage or faster turnaround. Learn more about how Crux’s expert team and tech-enabled debt capital markets platform help developers improve transaction readiness and find the right lender.
