Solar finance for a new or weak-covenant business

If your business is young, recently restructured, or simply does not have years of strong filed accounts behind it, you can still finance a commercial solar system. The route looks different from the one a long-established company with a fat balance sheet would take, and the pricing reflects that, but a workable deal is usually there. This guide sets out how lenders actually assess a thinner covenant, what the Growth Guarantee Scheme changes, and where an unsecured equipment loan fits.

We are a commercial solar asset-finance brokerage. We arrange hire purchase, equipment loans, finance and operating leases and sale-and-leaseback across a panel of UK lenders. We are not an installer, so the advice below is about the money, not the panels.

”Bad credit” is not how commercial lenders think

The phrase people search for is “solar finance bad credit”, but it imports an assumption from the consumer world that does not hold in business asset finance. A personal credit score is a minor input at most. What an asset-finance underwriter is really pricing is the covenant — the financial strength and reliability of the business that will make the payments.

For a limited company, the underwriter reads your filed accounts, recent management figures if available, the trading history, the sector, and how the directors have handled credit elsewhere. A sole trader or partnership will see more weight placed on personal credit and assets, simply because there is less corporate substance to assess. None of this is a pass-or-fail score. It is a judgement about the likelihood of being repaid over the term.

So a “weak covenant” generally means one or more of: a short trading history (under two or three years), modest or volatile profits, limited net assets, a recent county court judgment, or a sector the lender views as higher risk. Each of those nudges the decision and the rate. None of them, on its own, ends the conversation.

What lenders weigh, in practice

Three things carry most of the weight on a younger or thinner deal:

• Affordability. Can the business comfortably service the repayment out of existing cash flow, before any energy saving is counted? Underwriters discount the projected saving heavily, because it has not happened yet. If the repayment only works on paper once you assume the solar performs perfectly, that is a weak application.
• The asset itself. Solar PV is a long-life, fixed, hard-to-remove asset with a clear useful life. On a hire purchase or equipment loan the lender often takes the equipment as security, which improves the risk profile relative to an unsecured cash loan. A good install with reputable components on a property you control helps.
• Director and shareholder support. On a thinner covenant, a personal guarantee from the directors is common. It is not a sign the deal is bad; it is frequently the single thing that gets a younger business approved at a sensible rate.

If you want to understand the full picture an underwriter builds, our guide on what lenders look for in a solar finance application goes deeper. The short version: present clean, current figures and a realistic affordability case, and you remove most of the friction.

The Growth Guarantee Scheme

The most useful lever for a newer or weaker-covenant business is the Growth Guarantee Scheme (GGS), the successor to the Recovery Loan Scheme. Under GGS, the government provides the accredited lender with a 70% guarantee on the facility. The borrower remains liable for 100% of the debt — this is not a grant and not free money — but the guarantee reduces the lender’s loss-given-default, which makes them willing to lend to businesses they might otherwise decline, and often at a better rate than a purely commercial unsecured deal.

GGS can sit behind term loans and asset finance, which is exactly what a solar project needs. It is administered through accredited lenders rather than applied for directly, which is part of where a broker earns their keep: matching your profile to a lender that holds an allocation and views your sector favourably. Eligibility turns on factors such as UK trading status, turnover limits and the business being viable but for the access-to-finance gap. The scheme’s terms are periodically refreshed by government, so the precise caps are worth confirming at the point of application.

It is worth being honest about what GGS is not. It does not write off bad numbers, it does not remove the need for affordability, and a personal guarantee may still be required (though scheme rules limit when guarantees can be taken over a principal private residence). What it does is widen the door for a business that is fundamentally sound but light on track record.

Unsecured equipment loans

The structure that suits many younger businesses is an equipment loan. You own the solar system from day one, the lender advances the funds, and you repay over a fixed term — often without taking a charge over property, which is what “unsecured” means here. Because you own the asset, your business claims the capital allowances on it, and you keep the Smart Export Guarantee income on any electricity you export. That ownership benefit is the whole point of financing rather than signing a power purchase agreement, where the third-party funder keeps both the allowances and the export income. We set out that contrast in full on our asset finance vs PPA comparison.

For a thinner covenant, an unsecured loan is priced for the higher risk, so expect a rate above what a blue-chip would pay. The trade-off is speed and simplicity: no property charge to register, and the equipment frequently serving as the lender’s comfort. Full detail of how the structure works sits on our solar equipment loan page.

Stacking grants and regional funding

Finance is rarely the only ingredient. Sector and regional support can reduce the amount you need to borrow, which in turn shrinks the repayment the underwriter has to be comfortable with. There is no blanket UK solar grant for businesses, but there are devolved programmes, local growth funding and sector schemes that come and go. Reducing the borrow with grant money strengthens a weak-covenant application twice over: a smaller facility is easier to approve and easier to service. Our grants and funding overview keeps track of what is currently live and how it combines with asset finance.

The tax position does not change because you are smaller

One advantage holds regardless of covenant: when you own the system through an equipment loan or hire purchase, your business claims the capital allowances. Solar PV is special-rate (integral-feature) expenditure, so it qualifies for the Annual Investment Allowance at 100% on up to £1m of qualifying spend a year, with a 50% first-year allowance on anything above that. It does not qualify for 100% full expensing, which is reserved for main-rate plant — a common point of confusion. Both the AIA and the 50% first-year allowance are permanent reliefs.

VAT-registered businesses reclaim the VAT on the equipment either way. On a loan or hire purchase you pay the VAT up front and reclaim it; on a lease it is spread across the rentals. From accounting periods beginning on or after 1 January 2026, revised FRS 102 brings most leases on-balance-sheet for lessees, with short-term and low-value exemptions — worth noting if balance-sheet gearing matters to your own funders.

A realistic path for a thinner covenant

If your accounts are light, the sensible sequence is: get the system properly modelled, gather current management figures, reduce the borrow with any grant funding available, and then take the application to a lender holding a Growth Guarantee allocation, usually as an equipment loan with director support. That combination approves far more often than a cold commercial loan application would, and at a rate that keeps the energy saving comfortably ahead of the repayment.

Tell us your trading history and the project size and we will tell you, honestly, which lenders are likely to say yes and on what terms. Start with a no-obligation quote and we will shape a structure around the covenant you actually have, not the one a lender wishes you had.