Need a Building Loan? Here’s What Banks Look For

Local Law 97 mandates that all New York City buildings above 25,000 sq. ft. comply with energy efficiency standards by 2024 or face fines which incrementally increase. Perhaps you’ve already budgeted for an analysis of what it will take to lower your buildings’ carbon emissions. You’re still probably going to need a loan for the actual work. There are many banks out there that are willing to help. Based on our conversations with banks in our network, here’s what they look for when deciding whether or not to provide a building loan:

Cash Flow Available to Service Debt

What Percentage of Annual Revenue is in Arrears?

The percentage of annual revenue in arrears (payment owed by owners) is important to banks. If a bank sees that there is a large percentage of ownership in arrears, they will be reluctant to provide a building loan. In this case, it would behoove the building to work with owners to come up with a payment plan that lowers the amount in arrears.

Current Contribution to Reserves

What percentage of the current revenue is going into reserves? Banks want to see that ownership has a handle on excess revenue and that it’s saving for potential issues. Additionally, if the building has excess revenue, that proves to the bank it’s worthy of a loan because the surplus can contribute towards paying down the loan.

HOA / Maintenance Percentage Increase

What does the building board normally decide when it comes to HOA increases? How does it implement them? How often? This gives the bank an idea of what to expect throughout the course of the loan and shows how well ownership handles their costs.

Loan Payment to Annual Revenue Ratio

How much of the annual revenue goes to paying off the current or future loan? The higher this ratio gets, the less appealing the loan becomes for the bank. For cooperatives, this isn’t weighed as heavily. For condominiums, this is one of the most important metrics.

Units Rented vs. Owners in the Building

It is the bank’s assumption that buildings that have a higher percentage of ownership have a lower rate of risk. Banks believe that when owners live in the building, they’re more likely to have an effective maintenance plan. If you have a high rental ratio in your building, have your accountant provide detailed notes on the maintenance plan and upkeep in the notes of the financials. 

Is there a significant concentration of ownership? Most banks want boards to have full ownership of the building. If a building has a sponsor or a building owner that owns more than 15% of total units, that will make it harder to secure a loan with the bank.

Current Work + Future Budgets

Reserve Studies

Reserve studies are important since they give the board clarity on what work will need to be done over the next 10-20 years. Additionally, this assures the bank that the building won’t continuously come back to the well for additional resources. In order to understand how much time is left on the building equipment, you can hire an energy or mechanical consultant to perform an analysis. There are several different building components to consider: boilers, facade, roofs, DHW, and HVAC.

Payback period on current work

While this ratio will not take into account inflation, it helps the bank understand what the building will save by implementing this work. Furthermore, those savings can be utilized to help pay off the building loan.

Annual savings on work being done

The assumption from the bank is that these extra savings will help the building pay off the loan.

Future work + budgets

The bank wants to validate that future work won’t become an issue before the building loan is paid off. If future work does become an issue, the bank wants assurances that it will not deter loan payments. The bank will typically ask the architect (or consultant who performs the reserve study) what work is coming down the pipeline in the years leading up to the completion of the loan.

Current Interest Rate Climate 

Interest rates are expected to hike in the short term. Based on the market, it’s looking like interest rates will stabilize early next year and lower late next year. One might argue that it’s wise to wait until then to secure a loan. However, there are a lot of other variables that make it beneficial to secure a loan now if you have the ability to do so.

On an upcoming blog post, we’ll help you figure out how to pick the right loan.

Building Improvement Incentives are on the Ballot

This midterm election, New York State has put a proposition (prop 1) on the ballot known as the “Clean Water, Clean Air, Green Job Environmental Bond Act of 2022.” This act involves selling $4.2 billion worth of bonds in order to invest in our infrastructure to both protect against climate change and reduce carbon emissions. In my time as a building representative helping with retrofits, this is the closest I’ve seen the state come to helping owners pay for the work necessary to lower building emissions and comply with Local Law 97. This is a great step for New York. Below, we breakdown what this proposition entails and how it could benefit your building project.

What does the Bond Act on the ballot entail?

The “Clean Water, Clean Air, and Green Jobs Act” authorizes the sale of state bonds up to $4.2 billion dollars to fund environmental protection, natural restoration, resiliency, and clean energy projects. Of the $4.2 billion, there is at least $400 million that will be provided to green building projects. This includes several types of projects, but the one we’re the most excited about is the retrofits that need to happen for buildings to achieve compliance with Local Law 97. The funding will help with costs associated with green building projects, projects that increase energy efficiency, and costs associated with greenhouse gas emission reductions.

What does this mean for property owners?

If passed, prop 1 will make it much more affordable for property owners to reduce building emissions and comply with Local Law 97. The bond act also unlocks matching federal funds from the Inflation Reduction Act. With the incentives being provided at the City, State, and Federal level, it’s a great time to get your retrofit done before costs increase. 

Allocation of Prop 1 Funds

Dollar amount Percentage of Total Bill Description
At least $1.1 billion 26.19% Restoration & flood risk reduction
At most $ 650 million 15.48% Open space land conservation & recreation
At most $1.5 billion 35.71% Climate change mitigation
At least $ 650 million 15.48% Water quality improvement and resident infrastructure


See you at the polls!


Green Potential helps New York City property owners retrofit their buildings in a sustainable, cost-effective way. Interested in improving or retrofitting a building? Sign up for a free 30 minute consultation to see if Green Potential is the right fit for your project.

Local Law 97 is one of the most ambitious plans for reducing emissions in the nation. Local Law 97 was included in the Climate Mobilization Act, passed by the City Council in April 2019 as part of the Mayor’s New York City Green New Deal. Under this groundbreaking law, most buildings over 25,000 square feet will be required to meet new energy efficiency and greenhouse gas emissions limits by 2024, with stricter limits coming into effect in 2030.

Why NYC Building Owners Should Invest in a Retrofit Now

Image of NYC building.

If you own property in New York City, you know the headache of having to instate ad-hoc solutions to persistent structural problems due to budget constraints. Local Law 97 is calling on NYC building owners to make improvements that reduce emissions or face fines. Though daunting, LL97 is an opportunity for NYC building owners to group together structural improvements while implementing measures to lower greenhouse gasses. This can all be done at a reduced cost thanks to the incentives being provided at the City, State and Federal level.

Why NYC Building Owners Aren’t Investing in Improvements

Why do NYC building owners avoid investing in sustainable building upkeep? Money. Money (cost) includes variables such as rising insurance rates, scaffolding expenses, supply chain dysfunction and a shortage of available architects and contractors. In order to skirt these expenses, co-op/condominium boards tend to opt for cheaper, temporary solutions to complex projects. As a result, these temporary solutions leave future owners and board members to deal with mounting repercussions. My research indicates that cutting corners in the short-term is not the most cost-effective approach. This is precisely because supplies, equipment, services and labor are subject to dramatic market fluctuations which rarely benefit property owners.

The Benefits of Performing A Retrofit Now

There are factors that stand to benefit property owners if they act swiftly and strategically. New York State and Con Ed incentives, the Inflation Reduction Act and reasonable interest rates all present time-sensitive opportunities. As interest rates increase, incentive programs run dry and supply chains are disrupted, there will be overwhelming demand for dwindling resources. Other factors, such as impending fines enforceable through the Climate Mobilization Act (LL97), should encourage property owners to act now. In addition, as LL97 becomes more prevalent, potential property owners will be more likely to buy into buildings who have done the work to be compliant. Failure to invest in smart and enduring modifications is not only a financial hazard, but an environmental one.

Why Green Potential?

Green Potential works closely with NYC building owners to generate holistic solutions to the problems I’ve outlined. We source funding for building retrofits. We also coordinate a team of consultants, architects and engineers who are qualified for and excited about your particular project. Our database of vendors provides optimal efficiency so that the ideal service providers are well-matched with building stakeholders.

As a board member and owner, I understand the weight and importance of a building retrofit. Consider us the building representative that takes into account all dimensions: scope, incentives, labor, materials, sustainability, insurance, fees and fines, look and feel and—most importantly—cost.