Looking to equip your commercial property with Solar panels? Having trouble coming up with the money? If so, you should know that there are plenty of commercial solar financing options available.

Wondering what these financing options are? Then read on. Here are 5 must-know tips for financing a commercial solar installation.

1. Engage in a Solar Service Agreement

Our first piece of advice is to engage in a solar service agreement. This is an agreement where you receive solar panel installation at little to no cost. The tradeoff is that, over time, you pay for the electricity that is generated by the system. This money is paid to the contractor at a price that’s lower than the grid electricity price, thus benefitting both the contractor and the customer.

These agreements tend to last between 10 and 25 years. Once they end, the customer can either pay for the system outright, extend the agreement, or have the solar panel system removed from the building.

These are beneficial in that you never have to pay a large sum of money at one time. Note, though, that there are some downsides.

For instance, if you paid for solar panels upfront, you would get a tax write-off year in and year out. You might also get other financial incentives. When you enter a solar service agreement, however, the contractor receives these incentives instead.

Find A Commercial Solar Electrician to Help Choose the Right Panels

2. Take Out a Commercial Solar Lease

Another option for financing is to take out a commercial solar lease. These are generally provided by non-profit organizations.

These leases can be beneficial. Note, though, that they tend to have higher monthly payments than solar service agreements. In addition, they don’t allow you to take solar-related tax breaks.

The one big upside to commercial solar leases is that their buyout prices are usually lower than those of solar service agreements. That said, with all of the costs summed up, commercial solar leases will have you paying more.

3. Use Public Financing Options

There are some businesses out there that could benefit from public financing options. For instance, those starting small farms can take out farm loans from the USDA. Small businesses in general, can obtain small business loans from the Small Business Administration.

In many cases, a single loan alone won’t be able to cover the cost of a full solar panel installation. However, if you’re able to obtain several loans, all of them combined might be able to cover the cost, and maybe even at a lower overall interest rate than what you would get with other financing options.

To find public financing options for your industry, go to Google and type in something to the effect of “funding for businesses in [your industry]” or “loans for [your industry] businesses”.

You can also make calls to your local and state municipalities. There might be loans available at an even smaller scale.

4. Take Advantage of Tax Equity Financing

Another form of financing you can use for the installation of commercial solar panels is tax equity financing. This is when a tax investor partners up with a solar company as a means of funding a solar installation project. There are several types of tax equity financing out there.

One type is an inverted lease. This is when the solar company and the tax equity investor form both an LLC partnership and a tenancy partnership. Once these have been formed, the equity investor leases the project and receives solar-related tax incentives through it.

There’s also a partnership flip. In this situation, the solar project is owned jointly, with the tax equity investor initially owning 99% of the project. Over time, however, as more money is made from the solar system, the investor’s percentage of ownership falls. Eventually, it reaches the point at which the solar company owns more of the project than the investor.

Finally, there’s a sale leaseback. In this situation, the tax investor owns the entire project but then leases it to the solar company.

You can learn more about tax equity financing by reading this.

Learn More about Tax Credits

5. Pay Cash (And Maybe Supplement With Personal Loans)

If you have available capital, you can simply make a commercial solar cash purchase. This is the cheapest option overall, though it’s obviously going to cost you a great deal upfront.

There are major incentives to paying cash. For example, if you’re able to buy your solar panel system instead of renting it, you can take advantage of the Inflation Reduction Act. The act, passed in 2022, enables companies to take a 30% solar tax credit.

In other words, if you spend $100,000 for the installation of a solar panel system, you’ll be able to subtract $30,000 from your tax balance. That’s a substantial savings that you won’t get with other financing options.

In fact, it might even incentivize you to take out small personal loans to supplement your own cash. Oftentimes, the interest accumulated on a small loan will be much less than what is saved through the aforementioned tax credit. As such, even with a loan taken out, you’ll save money compared to other financing options.

There Are Ample Commercial Solar Financing Options Available

As you can see, there are ample commercial solar financing options available. Whether you’re taking out a commercial solar loan, a commercial solar lease, a solar service agreement, or otherwise, you have options available to you.

Are you a property manager? Looking for more tips on how to make updates to your property? If so, you’re in the right place; Property Manager Insider has you covered.

Read some of our other articles right now!

Learn More About Solar Financing

There are many benefits for businesses that opt for solar financing. These include reducing operational expenses, achieving energy autonomy, and the given tax incentives.

If you are keen on understanding more about solar financing options, consult the proficient team at Property Manager Insider. We are a complimentary resource for property managers offering industry updates and insights.

Click here to contact us today. We look forward to hearing from you.

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