Page written by Chris Godfrey. Last reviewed on August 26, 2024. Next review due March 1, 2025.
Businesses that install solar equipment to provide their energy needs can benefit from cheap, green energy and major tax benefits as well as doing good for the environment. However, commercial solar energy systems are not cheap, typically costing more than R250,000 to buy and install. For this reason, many businesses choose to finance their solar investment – reducing strain on working capital by paying for the equipment over time instead of all at once.
Solar equipment financing refers to specialist business loans and leases that help organisations buy or rent the commercial solar equipment they need. This type of financing is more readily provided by online lenders than traditional banks and credit unions and it can be used to buy or rent new or used commercial solar panel systems.
Although commercial and residential solar panels both generate electricity using energy from the sun, there are key differences in these systems:
Firstly, financing or leasing may be a more tax efficient way to obtain the solar equipment you need. Secondly, because you’ll only need to make a down payment on the equipment, instead of covering the whole cost upfront, you may be able to buy or lease a better, bigger and more expensive commercial solar panel array than you could afford with cash.
Solar financing can cover the costs of the solar equipment and its installation. It may also cover maintenance and repairs. If you choose to finance your solar panel system, there are three ways to go:
Let’s look at these options in more detail:
All business loans for the purchase of commercial solar equipment work with the same basic format: You borrow a sum of cash and then repay it over time. Interest charges and fees are added to the principal amount you borrow. The lender may retain a lien on the equipment during the term of the loan. By contract end you’ve paid the loan off and you own the equipment outright.
Leasing works differently from business loans. With a lease, you’re not buying the solar equipment, you’re taking out a long-term rental. Depending on the type of lease you choose, you may have the option to buy the equipment at contract end for a pre-agreed sum,.
Because you are not repaying the whole cost of the solar equipment, leasing usually requires lower monthly payments than business loans. You may also pay a smaller down payment – perhaps equal to one or two month’s repayment instalments.
If you choose not to buy the equipment at the end of the lease, the solar panels go back to the lender. You would then need to take out a new lease and obtain replacement equipment.
Some lessors (lenders) may give you the option to extend the lease if you prefer to keep the equipment but do not wish to pay the residual.
A Power Purchasing Agreement (PPA) is an agreement between your business and a third party who pays for, maintains and owns the system they install at your business premises. This option can give you easy access to solar energy, but you’ll have no possibility of ever owning the system, nor will you gain any tax advantages. Instead, just like buying electricity from your local utility supplier, you pay the solar system owner an agreed-upon price for the electricity their equipment generates.
PPAs can last from 10 to 25 years, giving you long-term access to renewable energy and a reduced electric bill.
Probably. Even if your credit score is weak and/or you’ve been turned down elsewhere, it may still be possible to get the solar equipment financing you need. To find out if you qualify before you apply, contact Swoop to discuss your funding needs with a finance expert.
No matter if you’re seeking your first equipment loan or you’re a seasoned borrower, working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your borrowing needs, get help with your application and to compare high-quality equipment financing deals from a choice of lenders. Give your manufacturing business the equipment it deserves. Register with Swoop today.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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