Green Equipment Loan: Solar Asset Finance

A green equipment loan is the simplest ownership route of all: a business loan used to buy your solar system, where you own the equipment outright from day one and repay the loan over one to seven years. There’s no lessor, no residual-value arrangement and no transfer of title at the end — you own the asset the moment it’s installed, and the loan is just a separate liability you pay down.

Ownership and full allowances from day one

Because you own the system outright, you get the full capital-allowances benefit straight away — exactly as if you’d paid cash. Solar is special-rate expenditure, so it qualifies for the Annual Investment Allowance at 100% on up to £1m, and the 50% first-year allowance above that. The bill savings and Smart Export Guarantee income are all yours, and the interest on the loan is a deductible business expense. It combines the tax position of a cash purchase with the cash-flow profile of finance.

Often unsecured against the solar itself

A useful feature of equipment loans is that they’re frequently unsecured against the solar asset — or secured only lightly — so you’re not granting the lender a charge over the panels themselves. That can matter where the system is on a leasehold roof, or where you’d rather keep the asset unencumbered. Security and rates vary by lender and by your covenant strength, which is where brokering across a panel pays off: we place the deal where the terms are best.

Government-backed lending

Many lenders fund renewable equipment loans through the British Business Bank’s Growth Guarantee Scheme, the successor to the Recovery Loan Scheme, under which the government guarantees 70% of the facility. That backing helps lenders say yes to unsecured solar lending for SMEs that a high-street bank might hesitate over. Facilities typically run from £25,000 to £500,000 — see our grants and funding page for how the scheme fits alongside the tax reliefs.

Bundle solar, battery and EV charging

Because an equipment loan funds whatever kit you’re buying, it’s an easy way to finance a combined project — solar PV plus battery storage plus EV charging — under a single facility and a single repayment. That often improves the overall economics: the battery lifts self-consumption (so you import less), and the chargers add an amenity or revenue stream. We model the combined system and structure one loan across it.

When a loan beats a lease

An equipment loan tends to be the best fit when you:

• want to own the system and claim the allowances yourself;
• would rather not secure borrowing against the equipment;
• are combining solar with battery or EV charging in one project; and
• value a simple, single liability over a lease’s end-of-term mechanics.

If you’d prefer the lender to carry the allowances and price them into lower payments, a finance lease may suit you better; if ownership of the asset itself matters most and you want title to transfer formally at the end, hire purchase is the classic route. We compare all three from your numbers.

Worked example: a 90 kW system on a five-year loan

All figures below are illustrative — they show how an equipment loan behaves, not a quote. Your rate, generation and savings depend on your roof, your energy price and your covenant. Run your own inputs through the finance calculator or ask us for an indicative quote.

Take a 90 kW rooftop system installed at £99,000, funded on an unsecured five-year business loan.

Item	Illustrative figure
System size	90 kW
Installed cost	£99,000
Term	5 years (60 monthly payments)
Indicative rate	around 9.5% APR
Monthly repayment	about £2,080
Annual repayments	about £24,960
Total repaid over the term	about £124,800 (roughly £25,800 of interest)
Year-one generation	about 85,000 kWh
Year-one bill savings plus SEG export	about £18,500

The monthly cost. At roughly 9.5% APR over 60 months, the loan costs about £2,080 a month, or about £24,960 a year. You own the £99,000 system from day one; the loan sits alongside it as a separate liability you pay down.

What the energy offsets it. A well-sited 90 kW array generates in the region of 85,000 kWh in year one. With most of that self-consumed against grid power and the surplus exported under the Smart Export Guarantee, the combined bill saving and export income comes to roughly £18,500 in year one — and it rises as energy prices rise, whereas the loan repayment is fixed.

The net cash-flow position. On the energy benefit alone, a fast five-year loan repays quicker than the system saves in the early years: about £24,960 out against about £18,500 saved, a gap of roughly £6,500 a year. The tax relief is what turns year one cash-positive.

The year-one tax effect (25% corporation tax). Because you own the asset, solar’s special-rate expenditure qualifies for the Annual Investment Allowance — and the full £99,000 sits well within the £1m AIA cap, so the whole £99,000 is written off against profits in year one (this is AIA, not full expensing, which does not apply to special-rate solar). For a company paying the 25% main rate, that is a corporation-tax reduction of up to £24,750 (£99,000 × 25%) in year one. The year-one loan interest — the larger share of the ~£25,800 total interest falls early — is also a deductible expense, adding a little over £2,000 of further relief. Netting it out: the roughly £18,500 energy benefit plus about £24,750 of AIA relief plus around £2,000 of interest relief, less about £24,960 of repayments, leaves year one comfortably cash-positive. From years two to five the fixed repayments modestly outrun the (rising) energy benefit; once the loan clears at year five, the full saving is retained with no finance cost at all.

The headline: the AIA front-loads the return, so ownership plus a loan can be net cash-positive in year one even while the system is still being paid off.

How an equipment loan compares with the other routes

An equipment loan is one of six ways to fund commercial solar. The axes that actually change the decision are ownership, who banks the capital allowances, whether the asset sits on your balance sheet, when the VAT falls, the typical term and who the route suits. If ownership itself is not the goal, an operating lease or a PPA steps back from it entirely.

Route	Ownership	Who claims capital allowances	On balance sheet?	VAT on the kit	Typical term	Best for
Equipment loan (this route)	You, from day one	You (AIA 100% to £1m; 50% FYA above)	Yes — asset plus loan liability	Up front, reclaimable if VAT registered	1–7 years	Owners wanting full allowances, often unsecured
Hire purchase	You, title transfers on the final payment	You (AIA 100% to £1m; 50% FYA above)	Yes — asset plus HP liability	Up front, reclaimable	2–7 years	Owners spreading cost who want formal title transfer
Finance lease	Lessor owns, you use	Lessor claims, passes the benefit via lower rentals	Yes (FRS 102)	On each rental	3–7 years	Businesses that cannot fully use the allowances themselves
Operating lease	Lessor owns	Lessor claims; lessee gets none, but rentals are deductible	Moving on-balance-sheet under revised FRS 102 for periods from 1 Jan 2026	On each rental	3–7 years	Flexibility and shorter commitment; rentals fully deductible
PPA	Funder owns	Funder claims and keeps the SEG income	Off — you buy power, not the asset	On the power you buy	10–25 years	Zero capex; pay per kWh with no ownership

When this route is NOT the right choice

An equipment loan is the wrong tool when your business cannot actually use the tax relief that makes it work. If you are loss-making, already fully sheltering profits, or otherwise short of taxable profit to set the AIA against, the allowances that front-load the return simply sit unused — and you would be better letting a funder monetise them for you. In that case a finance lease hands the allowances to the lessor, who prices the benefit back into lower rentals, or a power purchase agreement removes the capital cost entirely and charges you per kWh instead. Weigh it against your own tax position before you borrow.

Common questions about solar equipment loans

Do I need a deposit or security for a solar equipment loan?

Most equipment loans for commercial solar are arranged with no deposit and, frequently, no charge over the panels themselves — particularly where the facility is backed by the Growth Guarantee Scheme. Some lenders will look for a debenture or a director’s guarantee depending on your covenant strength and the facility size, but a specific charge on the solar asset is often avoidable. That is one reason ownership via a loan appeals where the system sits on a leasehold roof. Where security or rates are tighter, brokering across a lender panel is what wins the better terms.

Can I repay a solar equipment loan early, and does that save interest?

Yes. Because you own the asset outright and the loan is a straightforward liability, you can usually settle early — for example when a strong export year, an asset sale or a fresh capital budget frees up cash. On most equipment loans, early settlement reduces the remaining interest you pay, though some lenders apply an early-repayment fee or a short interest window, so the saving depends on the specific facility. If the flexibility to clear the debt early matters to you, we flag it as a selection criterion when we place the deal, and we compare the fixed cost of a loan against a lease so you can see both.

Get an equipment-loan quote

Send us your project details and basic company information and we’ll place an equipment loan across our lender panel — including Growth-Guarantee-backed options — and present it alongside hire purchase, lease and cash. Request a finance quote; an indicative decision usually takes 24–72 hours.