Financing Fleet Electrification:
Government-Backed Loan Guarantees Can Unlock Bank Financing by Mitigating Risk
Revised May 13, 2024
Government-backed loan guarantees can play a critical role in unlocking competitive financing options for fleet electrification. CALSTART interviews have revealed that commercial banks and lenders, who have low credit risk tolerance, make the highly conservative assumption that electric trucks will hold little value by the end of their financing term. This “Residual Value (RV) risk,” which occurs due to the absence of electric truck resale price data, is broadly hindering electric truck fleets from accessing at-scale, low-cost loans. CALSTART recommends that green banks and federal and state agencies implement an innovative financing tool to overcome RV risk and accelerate the financing of electric trucks: loan guarantees. This explainer provides an overview of how a government-backed loan guarantee is an unparalleled innovative financing tool for accelerating the mass-market adoption of fleet electrification.