The church of the Unitarian Universalist Congregational Society in Westborough, Mass., offers an ideal spot to put solar panels. “We have a nice big roof. It faces the right way, without too many trees around to shade it,” says Heidi-Lynn Mitchell, a member of the congregation. Church principles, moreover, call on members to be good stewards of the environment. “We’re ripe for this,” Mitchell says.

Until recently, though, financing challenges have posed a barrier to going solar. “Because we’re a not-for-profit, we can’t take advantage of tax credits. Banks are not jumping over themselves to lend us the money,” says Mitchell, who works professionally as a sustainability consultant.

But in late 2013, Mitchell heard about a company that would enable community members to fund a solar deal on their own. Village Power Finance (VPF), based in Palo Alto, Calif., offers a solution for churches, schools, and other nonprofits whose members are willing to invest their own money in solar projects. “There’s huge demand for these great projects, and not a lot of money out there to finance them,” says Ty Jagerson, founder and CEO of VPF.

The VPF solution “is not a handout or donation,” Jagerson says. Nor is it a crowdfunding scheme in which people chip in $25 or $100 to help a good idea get off the ground. Instead, members of a nonprofit entity invest in a project at a fairly substantial level. (Investments in a VPF project typically start at $5,000.)

VPF uses that money to form a special purpose company that buys and installs solar equipment at a designated site. Once the equipment begins to generate electricity, the special purpose company sells that power to the nonprofit and uses the revenue to pay back investors—with interest. Investors can expect a return of 3 percent to 8 percent, depending on whether they can take advantage of tax credits, Jagerson explains. “We’re producing cash-generating green assets, and those assets stay in the local community,” he says.

The nonprofit entity “gets lower energy bills and renewable power, and does not have to invest a dime,” says David Simpson, chief operating officer of VPF. “Member investors get a green investment that pays a return, and they contribute to the well-being of the nonprofit they support.”

Explaining this model to nonprofit boards and potential investors takes time. “It’s important that investors understand the process and risks. We’re cautious,” Jagerson says. He and his team are also mindful of evolving financial regulations that govern their business. For those reasons, the timeline for projects ranges from six months to three years. VPF launched early in 2013, and it had about two dozen deals in development by the end of the year. “We haven’t started building any of them yet,” Jagerson notes.

An essential part of the VPF model involves finding community champions like Mitchell to advocate for solar projects. She expects her congregation to reach a decision early this year—but only after church leaders have aired and answered each member’s questions. “We need to reach a solid consensus that this is right for the church in the long term,” she says.

“This is not the way the solar industry usually works,” Jagerson says. “Most companies have reasonably high-paid salespeople who do their thing and then go away.” The cost of a VPF project starts at about $300,000—which isn’t enough to pay the cost of fielding a sales team. “The sweet spot for us is the 100- to 500-kilowatt range,” Jagerson says. (Installation costs run about $3 per watt.)

VPF joins a growing ecosystem of organizations that aim to finance small-scale solar projects. Mosaic, based in Oakland, Calif., uses an online crowdsourcing platform to raise money to support such projects through loans. Since its launch in 2012, Mosaic has raised more than $5.6 million from individuals and institutional investors. Boston Community Capital, meanwhile, leverages both loans and equity investments to help nonprofits reduce the upfront cost of going solar. Its latest financing round brought in $7.5 million for eight projects at various nonprofits throughout Massachusetts.

Jagerson sees these efforts as complementary to the work of VPF. “Even with crowdfunded debt, you still need to have equity in those deals,” he explains. Leaders at some nonprofits, meanwhile, may try to raise capital for solar projects solely through donations. “That’s fantastic—if your community has that kind of cash available,” Jagerson says.

Read more stories by Suzie Boss.