Are you planning to join the green revolution? Thinking about making the switch to solar power for your home?
It’s a bright idea that not only reduces your carbon footprint. It could also lead to significant long-term savings.
However, understanding the financing options available can be somewhat of a maze. So if you’re a business owner looking to invest in commercial solar, read on. This listicle will illuminate commercial solar financing options that you can try.
Cash Purchase
Paying cash for your solar panels may seem like a hefty upfront investment. However, it comes with multiple perks.
First and foremost, you own the system outright. This means you are the primary beneficiary of the long-term savings on your electricity bills.
The absence of monthly payments also means you can avoid the interest associated with loans or leases. This makes it potentially the most cost-effective option in the long run.
If you’re in the area, hiring Redmond’s premier home solar installer with cash allows you to take advantage of solar tax credits. You can also have other financial incentives immediately.
Commercial Solar Loans
If writing a big check isn’t on the cards, solar loans provide an alternative. These loans can come from a variety of sources. This includes:
- local banks
- national banks
- credit unions
- solar panel manufacturers
The types of solar loans available vary in terms, of interest rates, and other aspects. But generally, there are options that you can choose from.
Types of Solar Loans Available
Unsecured solar loans generally have higher interest rates. But the upside is the approval process tends to be more straightforward since no collateral is needed.
There are also secured solar loans which are commonly offered by banks or credit unions. They necessitate collateral such as your home or business property.
The interest rates for secured loans are usually lower, but the terms may be stricter. If you default on payments, the lender has the right to seize your collateral.
A third option is government-supported loans provided by agencies like the Small Business Administration (SBA). These loans come with low interest rates and flexible payment options. However, they require a more extensive application process and may have stricter eligibility requirements.
Interest Rates and Repayment Terms
Like any other loan, the interest rate for a solar loan depends on your credit score and other factors. Rates can range from 3% to 8%, with repayment terms typically between five to ten years.
The longer the payment plans, the lower the monthly payments will be. However, this also means more interest paid over time.
On average, most commercial solar systems should be able to pay for themselves within seven years. After that, the electricity generated is essentially free.
Solar Leases
Solar leases represent another pathway for businesses to attain a solar installation with minimal or no upfront costs. This financial arrangement allows companies to rent their solar systems. This makes it an attractive option for those who prefer not to purchase outright.
How Solar Leases Work
Solar leases typically run for 15-20 years. This is the time during which the leasing company retains ownership of the system and responsibility for maintenance.
Leases often include a clause for the buyout of the system once the lease term has expired. This allows businesses to take ownership of the equipment and continue receiving the benefits of solar power.
Pros and Cons Compared to Ownership
The main advantage of solar leases is the lack of upfront costs. This makes it an attractive choice for businesses that do not have the capital available for a cash purchase or cannot qualify for a loan.
However, leasing typically means lower savings over time compared to owning the system outright. With ownership, you can also benefit from any state or federal tax rebates. Leasing companies often receive these benefits instead, passing on only a portion of the savings to the lessee.
Additionally, leasing usually requires businesses to keep their system for the entire lease term. This may not be ideal if you want to upgrade or sell your property before the lease is up.
Power Purchase Agreements (PPAs)
A power purchase agreement (PPA) is a financial arrangement where a third-party company installs and maintains the solar system on your property. In exchange, you agree to buy the electricity generated by the system at a predetermined rate.
How PPAs Work
A PPA typically runs for 15-25 years. During this time, the solar provider sells you the power produced at an agreed-upon price. This fee is often lower than the local utility rates. This provides businesses with immediate savings on their electricity bills.
Pros and Cons Compared to Ownership
Similar to solar leases, PPAs require little or no upfront costs, making them an attractive option for businesses. However, as with leasing, you will not be eligible for tax credits or incentives since the solar provider retains ownership of the system.
The terms of PPAs are also usually more rigid compared to owning a solar system outright. You may be locked into purchasing electricity from the PPA company for the entire term.
Net Metering
Net metering is a program that allows businesses with solar panels to sell excess energy back to the grid. This provides additional savings by offsetting the cost of any electricity purchased from the utility company.
How Net Metering Works
When your solar system produces more energy than you need, it sends this surplus back to the grid. In return, you receive credits on your electricity bill. These credits can then be used to offset any energy you consume from the grid when your solar system is not producing enough.
Pros and Cons Compared to Other Financing Options
Unlike other financing options, net metering does not involve any additional costs or contracts. It allows businesses or residential properties with solar panels to maximize their savings by selling excess energy.
However, the rules and regulations for net metering vary in different states and territories. Some areas offer favorable rates for excess energy sent back to the grid. Others may have lower or no compensation at all.
Commercial Solar Financing Is Within Reach
With the numerous commercial solar financing options available, businesses can now make the switch to solar power without breaking the bank. Once you’ve secured financing, sit back and watch as your solar investment pays for itself over time. Not only will you be doing your part for the environment, but you’ll also be setting a good example for others to follow.
So join the green revolution today and switch to solar power!
Was this article helpful? If so, check out the rest of our site for more.