Multiple heat pump rebate incentive programs from Xcel, the Colorado Energy Office, and the Colorado Department of Revenue are succeeding in supporting Colorado state and utility emissions goals. The staff members at each of these organizations are truly caring and dedicated. And these rebates are stackable, meaning they can add up, which has led to incredibly low HVAC system prices, with another rebate program set to launch next month.

But a major blindspot is just coming into view, and it may change the service industry in Colorado forever.

As a small contractor, we work alongside many contractors in the region who are feeling the strain under what has grown into a massive contractor-backed financial float for these initiatives. Of course, we love the business. But without deep reserve funds or financing, we fear many local companies may be closing their doors before the season turns profitable.

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As these market conditions put pressure on HVAC contractors, homeowners may begin to feel higher prices, worse service, worse install quality and more maintenance issues. Many businesses won’t make it. This could slow heat pump adoption despite the quality of the technology being incentivized.

Here’s the scenario: A high-quality, well designed heat pump installation on average is close to $25,000 for a single-family home. The Xcel rebate would typically be in the $6,000 to $8,000 range. The HEAR rebate for an income qualified homeowner comes in at $10,500. The Colorado State Tax Credit rebate is a flat $1,000 for 2026. That totals $19,500 in rebates. As a homeowner, it’s amazing. Meanwhile, the contractor collects just $5,500 and then files for three rebates, which optimistically takes months to receive.

In reality, all the rebate programs are up-front discounts. HEAR flat out requires up-front discounts by the contractor. Xcel doesn’t require it, but market competition has created up front discounts as a de-facto standard to earn business.

The Colorado State tax credit is up front as well, and the most challenging to business owners. This is because the tax credit is taken when filing taxes, which many contractors claim on their own personal taxes. That means waiting sometimes over a year before getting fully paid.

The rebate payout is quite risky. In addition to the disparate contractor vetting processes, there are layers of documentation designed to track program goals, all of which are also different. One mistaken checkbox can invalidate the entire payment with no recourse or send the application back to the end of the line. After all, utility ratepayers and taxpayers are paying for these incentives and deserve to know their dollars are being used wisely. In practice, many rebate payments take months or longer to receive, all shouldered by the contractor.

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Now, scale that example job up by 15 times per month for a typical HVAC contractor. If half of a company’s rebate applications are denied or delayed, that means a quarter to half a million in revenue shortfall. For a firm with deep cash reserves this is a bad quarter to weather. For a small contractor, this can lead to late payroll, staff leaving, huge vendor debts and a real likelihood of shutting down operations or going bankrupt this summer. Even before summer takes off, delayed payments are piling up to the point where distributors and manufacturers are raising interest rates to hedge unpaid debts.

Luckily, some financing has arrived, but only for the Xcel program. Here, Eli offers to pay the rebate, if all documentation is in order, in less than one week for a hefty fee. It’s essentially an accounts receivable factoring business. That’s been a saving grace, kept employees paid and cash flow bearable. Unfortunately, no other rebate programs have this bridge.

There are solutions.

First, for small businesses, say less than 10 employees without dedicated rebate divisions, there could be a short form rebate application. Second, time-bound payment for properly filed rebates with interest for delays would help deliver payments on time. Third, small contractors need a state-backed bridge financing program. That alone could save many businesses on the edge right now. Fourth, for rebates not tied to homeowner income, these should aim to fund midstream equipment costs. This lowers overall program costs, gives greater control over efficiency standards, and eliminates contractor float for equipment entirely. Fifth, a pre-funding deposit can be sent to the contractor if all requirements are met under program guidelines, similar to the stellar Colorado CCEF RENU loan program.

We have created in Colorado one of the hottest heat pump growth markets in the United States. Unfortunately, its books are being balanced on the backs of contractors who are in the field doing the work.