Commercial Solar Financing
Commercial solar is a business investment in an income-generating asset. Companies generally choose to pay cash, which does generate an attractive internal rate of return (IRR), or use financing to reduce the upfront system cost and better match the investment outlay to the electricity bill savings over time.
Commercial Solar Financing Options
The best financing solution for your commercial solar project will depend on the availability of financing programs in your area and on your financial goals. Achieving positive cash flow quickly versus spreading the investment out over time will determine the type of financing you use.
Some commercial solar companies assist their customers with securing financing for commercial solar projects, offer in-house financing, or offer financing vehicles such as power purchase agreements (PPA) or capital leases.
Common Solar Financing Options
There are several common financing options for solar investments, each with advantages and disadvantages.
- Power Purchase Agreement (PPA): Fixed energy cost for 20-30 years, no upfront investment or capital costs, no equipment ownership, not available in municipally owned utilities
- Solar Lease: Little to no upfront cost, third-party-owned equipment, fixed lease payment for 15-20 years
- Capital Lease: Claim the tax benefits and reduced electricity costs, more complicated to executive and only makes sense in certain markets
- Cash Purchase: Own the solar PV system asset and generate your own power at no cost for the system’s lifetime (warrantied for 25 years but could be 40+ years depending on the manufacturer), maximum return on investment, shorter installation time
- Upfront Purchase with a Loan: All the benefits of a cash purchase but with lower upfront costs; loan products may be available from your solar company’s financial partners or your existing lender
Benefits of Financing Your Commercial Solar Project
Purchasing your commercial solar project with a loan is an attractive option for many businesses. It makes sense to spread out the cost of your solar investment out over time if you do not have significant liquid capital available to purchase a system outright or if your business has a limited capital budgeting window and you want to begin taking advantage of the energy savings and tax benefits sooner than that.
When should you not finance?
Solar financing programs may not be appropriate for all businesses or accessible in all markets, and each option has trade-offs. PPAs are not available in municipally owned utilities, for example, and not all solar companies offer solar leases. Businesses may not be able to find a lender or secure a loan for the entire cost of a commercial solar system. Another reason you may choose not to finance your system is to maximize your return on investment by owning the equipment and the power you generate while avoiding interest payments.
Let's Get Started
If you have questions about commercial solar financing or would like to explore which option may be the right fit for your business, contact us today. We'll schedule a free site analysis and proposal that includes financing options that meet your needs.
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