Solar loan provider Mosaic reached an agreement with Goldman Sachs in which the bank will buy $300 million in loans over time.
This deal will clear up space on Mosaic's balance sheet to finance more loans, and signals a prestigious bank's willingness to buy and own solar loans for itself.
Mosaic this week also finalized a partnership with Wave Solar to give Mosaic's dealer partners a pre-negotiated discount on the lead-generation platform. That service tracks and analyzes interactions with customers, potentially giving long-tail installers more resources to pursue their sales.
Banks have the lowest cost of funds, making them an ideal partner for loan sales, said Amir Friedman, vice president of bank partnerships. However, that money comes with stringent requirements in terms of compliance and information security.
"To be a lender to a bank, the bar is very high," Friedman said. "We were able to meet all of [Goldman Sachs'] vendor requirements and get them satisfied and purchasing from Mosaic."
That rounds out Mosaic's tool belt for ways to finance loans.
The company employs a hybrid model, choosing to keep some loans on its balance sheet via warehousing and securitization, while moving others off the balance sheet through whole loan sales. The presence of both options allows for maneuverability.
"If one particular market opportunity isn’t there, there will be another leg to the strategy to pick up that slack," Friedman said.
Mosaic issued a $139 million asset-backed securitization in February comprising 6,000 projects, which was oversubscribed, indicating market demand for such securities.
In the newly announced deal, Goldman Sachs will purchase the loans with its own balance sheet, Friedman noted.
"These are assets that they really want to hold and are comfortable holding," he said. "Once banks see we were able to get a bank comfortable with our compliance, other banks are taking interest."
For Mosaic, the bank deal could serve as a differentiator that other competitors don't have. The company ranked first for solar loan provider market share in 2016, followed by GreenSky Credit and EnerBank, according to GTM Research's April U.S. Residential Solar Update.
Mosaic's market share nearly tripled from 2015 to 2016, and it more than doubles the next runner-up. GreenSky and EnerBank, the report notes, offer other home improvement loans and are not necessarily trying to expand their solar business.
Mosaic's rise has coincided with a market shift away from third-party-owned leases and PPAs to customer-owned deals. Roughly three-quarters of residential deployments by companies outside of the top three are now customer-owned, while third-party owned continues to dominate among the top three.
The lower cost of capital from this sort of bank transaction could eventually help lower prices for loan customers, creating an additional pull toward that form of ownership.