How to finance commercial solar: step by step

Financing a commercial solar installation is not complicated, but it does have a logical order. Get the sequence wrong and you can find yourself committed to an installer before you have agreed how the project is paid for, or signing a finance structure that quietly hands your tax relief to someone else. This guide sets out how to finance commercial solar in five steps, the way we run it for finance directors and owner-managers as a whole-of-market broker. We arrange the funding; we are not an installer, so the advice here is about the money, not the panels.

Step 1: Model the system and the saving

Before any conversation about finance, you need a credible model of what the system does for your business. That means a half-hourly view of your electricity consumption, an estimate of how much of the generation you will use on site versus export, and a realistic figure for the installed cost.

The number that matters is not the headline price. It is the annual benefit: avoided grid purchases plus any export income under the Smart Export Guarantee, set against the annual finance repayment. When the saving comfortably exceeds the repayment from year one, the project funds itself out of cash flow. Our finance calculator lets you test repayment against the saving at different terms, so you can sense-check an installer’s quote before you take it any further.

Two figures drive everything downstream: the capital cost (which sets the finance amount) and the self-consumption rate (which sets the saving). Pin those down first.

Step 2: Choose the finance structure

This is the step where the tax position is won or lost, so it deserves care. The route you pick determines who owns the asset, who claims the capital allowances, and where the export income lands.

Solar PV is special-rate (integral-feature) expenditure. It qualifies for the Annual Investment Allowance at 100% on the first £1m of qualifying spend each year, with a 50% first-year allowance on anything above that. Both reliefs are permanent. Solar does not qualify for 100% full expensing — that relief is for main-rate plant only, and conflating the two is the single most common error we see in installer brochures. Our capital allowances page works through the figures.

How that relief reaches you depends entirely on the structure:

• Hire purchase or an equipment loan — your business owns the system, so it claims the allowances and keeps the export income. See solar hire purchase for how the ownership and allowance position works in practice.
• Finance lease — the lessor usually owns the asset and claims the allowances, passing the benefit back through lower rentals; the rentals are deductible against profits. Worth modelling if your business is not in a position to use allowances itself.
• Operating lease — no allowances for you, but the rentals are fully deductible. Useful where capital is tight or the allowances would be wasted.
• Capital purchase — pay cash, own outright, claim everything. The benchmark every other route is measured against.

There is also the question of a Power Purchase Agreement, where a third party funds and owns the system on your roof. Under a PPA the funder claims the allowances and keeps the Smart Export Guarantee income — you simply buy the power. That can suit a business with no appetite for capital or no taxable profits, but for most owner-managers the point of owning via asset finance is precisely that the allowances and the export income stay with the business. Our asset finance vs PPA comparison sets out the trade-off in pounds. You can browse all the structures on the verticals overview.

One accounting change to flag for 2026: the revised FRS 102 brings most leases on-balance-sheet for lessees for accounting periods beginning on or after 1 January 2026, with exemptions for short-term and low-value leases. If covenant headroom or gearing matters to you, factor that in when you compare a lease against hire purchase.

Step 3: Get indicative approval

With a structure in mind, the next step is an indicative finance decision. As a broker we take this to a panel of lenders rather than a single bank, which matters because solar approvals are driven by your covenant — the strength of your trading accounts — not by a personal credit score.

To get a clean indicative offer, have your last two years of filed accounts ready, recent management figures if the year-end is some way back, and the installer’s quote. For most established trading businesses an indicative decision comes back within a couple of working days. Younger or thinner-covenant businesses can still proceed, often through an unsecured equipment loan or with Growth Guarantee Scheme backing; the pricing simply reflects the risk.

Indicative does not mean committed. It tells you the rate, term and structure are realistic before you sign anything with the installer.

Step 4: Confirm the installation

Only once the finance is indicatively agreed should you lock in the installer and the specification. Match the finance term to the life of the saving — a five to ten year term against an asset that produces for twenty-five years keeps the early-year cash flow positive.

Make sure the quote you finance is the quote that gets installed. Changes to system size or scope after approval mean re-papering the facility, so finalise the specification, the price and the commissioning date before drawdown is arranged. If you are adding battery storage or EV charging at the same time, fund the whole project under one facility rather than three — it is cleaner to administer and usually better priced.

Step 5: Draw down on commissioning

The final step protects your cash. On a well-structured facility the lender pays the installer on commissioning — when the system is signed off and generating — not on the day the contract is signed. That keeps your money in the business until the asset is actually working, and it gives the installer a clear incentive to complete.

From commissioning, the repayments begin and the offsetting saving starts immediately. If you own the system, the capital allowances are claimed in the accounting period the asset is brought into use, and the export income flows from your first metered units.

A note on VAT

VAT on the equipment is reclaimable by VAT-registered businesses in the normal way. The route affects timing rather than entitlement: with hire purchase or a loan you pay the VAT up front and reclaim it, while a lease spreads the VAT across the rentals. The domestic zero-rating for solar does not apply to commercial installations, so budget for VAT and reclaim it rather than expecting it to disappear.

Ready to model your project?

The honest answer to “how do I finance commercial solar” is: model the saving, choose the structure that keeps the allowances and export income where they belong, get indicative approval before you commit, and draw down on commissioning. We can run all five steps with you. Start with an indicative figure on our quote page and we will take it to the right lenders for your covenant and your tax position.