Solar equipment loans for business explained

A solar equipment loan is the most direct way for a UK business to own its solar system without tying up cash. You borrow against the installation, the kit goes on your balance sheet from day one, and you repay over a fixed term while the energy saving offsets the instalments. Because you are the owner throughout, you keep the two things that matter most over the life of a 25-year asset: the tax relief and the export income.

This guide explains how a commercial solar loan works, who it suits, and where it sits against the other ways of funding a project. We arrange asset finance for commercial solar across the UK — we are a brokerage, not an installer, so the comparisons below are written to help you choose a structure, not to sell you panels.

What a solar equipment loan actually is

An equipment loan (sometimes called a business loan for solar, or a capital-purchase loan) funds the full installed cost of the system — panels, inverters, mounting, cabling, and often battery storage and EV charging in the same facility. You own the equipment from the moment it is commissioned. The lender’s security is usually the asset itself, and for stronger covenants the loan can be unsecured, with no charge over property and no personal guarantee.

Repayments are fixed and typically run over five to ten years, matched so that the monthly instalment sits at or below the monthly saving on your electricity bill. That is the test that matters: if the energy you no longer buy plus the energy you export is worth more than the repayment, the system is funding itself while you build equity in it.

Unlike a lease, there is no question of who owns the kit at the end — you always did. And unlike a power purchase agreement, there is no third party taking a margin on every unit you generate.

Ownership from day one — and why that drives the tax position

The single biggest reason businesses choose a loan over a lease or a PPA is ownership, because ownership is what unlocks the capital allowances.

Solar PV is special-rate (integral-feature) expenditure. It qualifies for the Annual Investment Allowance at 100% on up to £1m of qualifying spend in a year, and for the 50% first-year allowance on anything above that. Both reliefs are permanent. What solar does not get is 100% full expensing — that relief applies only to main-rate plant and machinery, and solar is specifically excluded as an integral feature. Anyone telling you a solar system qualifies for full expensing has the wrong relief.

Because a loan (like hire purchase or a cash purchase) makes the business the owner, the business claims those allowances. Run a typical example: a £150,000 system, fully within the AIA, gives a 100% deduction in year one. At the 25% main rate of corporation tax that is roughly £37,500 off your tax bill, brought forward to the first year you own the asset. Our capital allowances guide works the numbers through in detail.

Contrast that with the alternatives. Under a finance lease, the lessor usually claims the allowances and passes the benefit back through lower rentals (unless it is a long-funding lease). Under an operating lease, the lessee claims no allowances at all, though the rentals are deductible as a business expense. Under a PPA, the third-party funder owns the system, so the funder claims the allowances and keeps the Smart Export Guarantee income — you simply buy power. Our asset finance vs PPA comparison lays out where that margin goes over 25 years.

In short: a loan keeps both the allowances and the export income inside your business. That is the core of the case for owning.

VAT and the balance sheet

If you are VAT-registered, the VAT on the equipment is reclaimable whatever route you take. The difference is timing. With an equipment loan or hire purchase you pay the VAT up front and reclaim it on your next return, so you are out of pocket only briefly. With a lease, the VAT is spread across the rentals instead. (The zero-rating you may have read about applies to domestic installations, not commercial ones — there is no blanket VAT relief on business solar.)

On the balance sheet, a financed solar system appears as a fixed asset with a matching loan liability, the same as hire purchase. Worth noting for finance directors: the revised FRS 102 brings most leases on-balance-sheet for lessees, as a right-of-use asset and lease liability, for accounting periods beginning on or after 1 January 2026 (short-term and low-value leases are exempt). A loan was always on-balance-sheet, so this change does not alter how a loan looks — but it does remove one of the historic accounting advantages of operating leases, which is worth weighing if you were leaning that way for covenant reasons.

When a loan suits — and when it does not

An equipment loan is usually the right structure when:

• You are a UK taxpayer who can use the capital allowances. Owning is what captures them.
• You want the export income. The Smart Export Guarantee pays the system’s owner, not a funder.
• You would rather build equity in an appreciating saving than rent your own roof.

It is less obviously right if your business pays little or no corporation tax (a charity, or a loss-making year), since the allowances have less value — in which case an operating lease or a PPA may model better. We will tell you honestly when that is the case.

New or thinner-covenant businesses

A common worry is that a younger business, or one with a modest balance sheet, cannot finance solar. Commercial asset finance is assessed on the company’s accounts and project cash flows, not a personal credit score, and there is a specific route for businesses that fall short on covenant: the government-backed Growth Guarantee Scheme, under which the lender takes a 70% guarantee. That widens access to unsecured equipment loans for businesses that a high-street bank might decline. Pricing reflects the risk, so a thinner covenant pays a higher rate — but the door is open. See our grants and funding overview for how the scheme and other support stack alongside finance.

Funding solar, battery and EV together

One underused advantage of a loan is that it can fund the whole energy project in a single facility — solar PV, battery storage and EV charging on one agreement. Adding a battery lifts self-consumption (you use more of what you generate rather than exporting it cheaply), and chargers can open a revenue line. Bundling them keeps one repayment, one approval, and one set of allowances rather than three separate conversations.

Getting an indicative decision

You can have an indicative offer on a commercial solar loan inside a few working days. We are whole-of-market, so we put your project to a panel of asset-finance lenders and bring back the structure that fits your tax position and cash flow — loan, hire purchase or lease — rather than whichever product one funder happens to sell.

If you would like to see what owning your system on finance would cost and how quickly it pays for itself, request a quote and we will model it against your actual energy bill. There is no obligation, and the comparison is yours to keep.