Financing Options For Commercial Projects
Solar Leasing for Businesses
Various types of leases are available to fit the unique profiles and needs of system owners.
Capital lease financing is a common alternative to a traditional loan. The Capital Lease provides customers and their selected solar installers with interest-only progress payments throughout construction. Tax benefits, rebates and renewable energy credits are retained by the system owner. A Capital Lease is recognized as a capital purchase and must be recognized on the client balance sheet.
Municipal lease financing is available for tax-exempt, municipal customers looking to secure funding for solar installations. Municipal leases offer exceptionally low interest rates. Similar to a Capital Lease, Municipal leases give legal ownership of the equipment to the end client from day, one making them eligible for higher rebate levels in States where such incentives are made available for non-profit organizations.
Operating Lease financing can be a good solution to both tax-exempt entities and private corporations. The Operating lease receives special accounting treatment allowing the investment to remain “off balance sheet” for the host customer. This means that the investment will not affect your capital expenditure budget and have no negative impact on your accounting ratios. The lessor (bank) would retain legal ownership of the equipment and therefore be the recipient of all associated tax benefits.
Power Purchase Agreements (PPA’s)
PPAs can eliminate upfront costs significantly, if not all together. The agreement is between a qualified host customer and a third-party investor. The investor owns and operates the system and retains full responsibility for its maintenance. The host customer agrees to purchase the electricity generated from the solar facility for a period of 15 to 25 years. This financing method offers clean energy generation as a service to both public and private organizations with qualifying credit history.
With PPA’s, host customers:
- Pay less for electricity than they do from the local utility
- Pay only for electricity produced and delivered
- Don’t have to worry about system maintenance, which is handled by the third party owner
- Don’t have to provide any capital investment
- Own the buildings which house the solar array (typically sized at over 500kW)
