Financing & Funding Solar Energy Projects for Your Business

If you’ve decided to take the plunge and invest in a solar energy project, one of the most important questions that you’ll have to consider is how you’re going to fund it. The good news in this respect is that there is a range of options available, sometimes through grants and otherwise through loans at very attractive rates, which are available because it is generally understood how important transitioning to cleaner energy sources is.  

Why Solar Energy?

Transitioning to solar energy comes with substantial benefits for businesses. As a free and infinite source of power, from an environmental standpoint, it can substantially reduce the size of your carbon footprint. But there are also sound business reasons to make the switch. Your energy bills will be significantly reduced, while solar panels can even act as a very visual symbol of your environmental commitment, which is increasingly a factor taken into account by both customers and clients when they’re choosing who to do business with. 

What to Consider When Exploring Financing Commercial Solar Projects

There are a lot of factors to take into consideration when you’re looking into financing your solar project. 

Energy Consumption Patterns

The first thing you need to do is understand your energy usage because the amount of energy that you use should determine the size of the solar array that you need. 

Budget Constraints

You’ll need to make sure that your business can afford to pay for this. This means establishing what upfront costs you’ll have to pay, as well as ongoing costs. 

Long-term Business Goals

Consider your long-term business objectives and align your financing choice with your overall sustainability and financial strategies.

Available Tax Incentives

Remember that there are often various grants and other tax incentives of which you may be able to take advantage. This could have a significant influence on the viability of your project in the first place. 

The Reputation and Experience of the Finance Provider

Not all finance providers are created equal, and problems with the finance provider could cause you unnecessary time, work, or even money. Be sure to check the reputation of any potential finance providers, and always read the small print. Check with your local council to explore potential funding opportunities available for your green energy project; not all funding opportunities are national. 

Warranties and Guarantees

These are important. Solar panels are an investment, and a guarantee will ensure that you have peace of mind. Warranties will protect you if anything goes wrong. It is fairly typical for solar panel warranties to be for twice the amount of time that it’s expected for them to be paid in. Make sure that you have them for the financing terms but also for the panels themselves and their installation. 

Maintenance and Repair Options Under Financing Agreements

One of the bigger areas of dispute following the sale of any vehicle can be determining who is responsible for maintenance, repairs, and potential replacements in the event of issues with your project. Make sure that you know what maintenance and repair options may be available with your finance agreement. 

Flexibility and Scalability of the Financing Option

What are your future business plans? How might your usage fluctuate in the future, and can your financing move with that? Can your solar project be expanded should your business grow? 

Types of Solar Financing Options

Solar PPAs

A solar power purchase agreement (PPA) enables commercial property owners to go solar with no upfront investment. Through this financing model, the funding company installs a customised solar panel system on your business property free of charge. As the system owner, they handle the operations, maintenance and monitoring while you pay only for the power produced based on a lower, fixed rate guaranteed to cut electricity bills.

Grants and Incentives

There aren’t only numerous grants and incentives available for solar panels; there are also numerous places to go looking for them. You should always check with your local authority to see if they are running programmes. The government’s website has a finance and support finder. Energy companies themselves may have grants available. 

Commercial Loans

There are numerous commercial loan options to fund your transition to solar power. Preferential interest rates may be available, which could again reduce the amount of time it takes to pay down your investment. 

Leasing

When solar panels are leased, a third party installs them on your property and then sells you the electricity they generate. These payments can increase over the term. The rate at which they increase will be noted in your agreement, so make sure you take this into account before you sign anything. The fixed term is normally around 20 years. Once this is over, you can buy the solar panel system, have it removed, or renew your lease and continue making monthly payments. Solar panel leasing agreements can differ, so always check the terms and conditions carefully before you sign up.

Types of Solar Grants Available

Local Authority Grants

Your local authority may provide energy efficiency funding or sustainable business growth grants. You will normally need to submit a business case to apply if that’s the case.

The Smart Export Guarantee

The Smart Export Guarantee is a support mechanism which ensures people who generate their own electricity are paid for the electricity they export to the grid. This doesn’t happen automatically, so you need to sign up to get the SEG tariff.

Under the scheme, all licensed energy companies with 150,000 or more customers must provide at least one SEG tariff. Smaller suppliers can offer an export tariff if they want to. All suppliers can also choose to offer other means of making payments for exported electricity, separate from the SEG arrangements. 

Types of Solar Loans Available

Government Loans and Schemes

Government schemes may offer loans, grants or subsidised energy-saving measures to support small businesses in reducing their impact on the environment. These may help with energy efficiency measures, the upfront costs of investing in energy-efficient equipment, or sustainable development initiatives.

Commercial Loans

The advantage of getting solar loans is that shorten your return on investment (ROI) period substantially when compared to other solar financing solutions. Your solar panel installation payments can be lower than your current electricity bills, allowing you to save money in the long run.

How Do I Find a Reputable Commercial Solar Installer and Financing Provider?

The answer to this is to do your research! There are plenty of review websites out there, and these can be invaluable in terms of allowing you to confirm whether dealing with an installer or loan provider is worth using.

We here at Switchpal have partnered with a company called Path who have relationships with various installers around the UK. Their website has some excellent information about grants and government-backed tax relief. 

Can I Get a Solar Loan if My Business Has Bad Credit?

Yes, several commercial solar lenders offer loans to businesses with bad credit. Be aware, however, that the interest rates on these loans may be higher and that your ROI will take longer to get to you. 

What is a Power Purchase Agreement?

A Power Purchase Agreement is a type of financing in which the funding company installs a customised solar panel system on your business property free of charge. As the system owner, they handle the operations, maintenance and monitoring while you pay only for the power produced.

How to Apply for Solar Panel Grants

Most solar panel grants will have requirements. Some will be eligible only in certain industrial sectors (typically your Standard Industrial Code will be used for this if you’re a limited company, so make sure that yours is right before the start of the application!), while many will only be available to Small and Medium Enterprise companies and others will only be available in some geographical regions. You will have to supply 12 months of energy bills. 

A step-by-step process to apply for a loan might look a little like this: 

1. Check your eligibility before you do anything else whatsoever. There’s little point in going through the entire application process, only to find yourself being rejected because you weren’t eligible in the first place.

2. Assemble any documentation that you need. You may have to supply 12 months of energy bills, and costings. 

3. Research the funder and understand what their priorities will be if they can fund you.

4. You may have to write a business proposal. At the least, your application should include a full budget and a detailed explanation of what you hope the impact of your grant will be. 

5. If there is one, make sure you submit your application by the deadline!

6. Don’t be embarrassed to follow up after you’ve submitted it. 

A successful application should be properly costed, within the eligibility criteria, and with a strong business case. This is why understanding the funders’ goals is so valuable. If you can align your business vision with their aims, your chances of an approved application will rise substantially. 

There can certainly be complexities to securing financing or funding for solar panels, but the investment, both in terms of time and money, is more than worth it. From a business perspective, you can start to see a ROI in just a few years, while your green credentials will be displayed as visually as they can be. And perhaps most importantly, you’ll be making a difference in the fightback against change. Maybe it’s time to take that plunge.