Funding options
Commercial Solar Financing and Funding Options
Last updated 15 October 2026 · Figures indicative
Short answer: UK businesses can fund commercial solar five ways: a solar PPA (no capital, pay per kWh), an operating lease, asset finance or hire purchase (own the system, fixed monthly payments), a business loan, or cash purchase. PPAs preserve capital; buying or financing captures the full saving and tax allowances. The best choice depends on capital, tax position and tenure.
Funding options compared
| Option | Upfront | Ownership | Maintains | Saving captured | Tax reliefs | Term |
|---|---|---|---|---|---|---|
| Solar PPA | £0 | Provider | Provider | Part | Provider's | 15–25 years |
| Operating lease | £0–low | Lessor | Varies | Most, less rental | Lessor's | 5–10 yrs |
| Asset finance / HP | Deposit | You (at end for HP) | You | Full, less interest | Usually yours (HP) | 3–7 yrs |
| Business / green loan | £0–low | You | You | Full, less interest | Yours | 3–10 yrs |
| Cash purchase | Full | You | You | Full | Yours | — |
Solar PPA
The provider funds, owns and maintains the system; you pay 10–14p/kWh for what you use. Best when capital is scarce or you want no performance risk. See no upfront cost solar.
Operating lease
A fixed monthly rental for the equipment. You keep the electricity but pay whether or not the panels generate, so you carry yield risk. Usually treated as a right-of-use asset under IFRS 16.
Asset finance and hire purchase
You spread the cost over three to seven years and own the system at the end. With strong daytime use, monthly payments are often below the energy savings, so it can be cash-positive from the start.
Loans, including green loans
Banks and specialist lenders offer business and "green" loans for energy projects, sometimes at a lower margin. Loans may be secured on the business or its property.
Cash purchase and capital allowances
Paying cash captures every penny of saving and typically pays back in 3–7 years. Purchased solar is special-rate plant: AIA (up to £1,000,000) or a 50% first-year allowance for companies may apply. Compare total returns in PPA vs buying and solar costs.
Grants and local funding in 2026
There is no national grant for business solar in 2026. Some councils, combined authorities and devolved governments run occasional grant or low-interest loan schemes — check your local growth hub. Be cautious of anyone promising a "government-funded" install.
Decision tree
- Capital available and taxable profits? → Buy.
- No spare capital, but you want to own it eventually? → Asset finance / HP.
- No capital, want no risk, site is large and tenure long? → PPA.
- Short lease or uncertain future? → small purchase, lease, or wait.
CFO checklist
- What hurdle rate must the project beat?
- How will each option appear under IFRS 16 / FRS 102?
- Can we use capital allowances this year?
- How certain is our tenure at this site?
- Who carries performance and maintenance risk?
Related reading: our complete guide to solar power purchase agreements, fully funded solar explained, PPA vs buying compared, what a purchased system costs and funding routes for schools.
Commercial solar finance FAQs
Which financing option gives the best ROI?
Cash purchase usually gives the highest return, because you keep every kWh of saving and can claim capital allowances. Asset finance and loans come close if the interest rate is low. A PPA gives a lower lifetime return but needs no capital and carries no performance risk.
Can we claim AIA on leased panels?
Generally not on an operating lease or PPA, because you don't own the asset — the lessor or provider claims the allowances. Under hire purchase you are usually treated as the owner and can claim. Ask your accountant to confirm for your agreement.
What credit checks do funders do?
Funders typically review two to three years of filed accounts, credit reports, existing debt and sometimes management accounts. For long PPAs they want confidence the business will trade for the full term; parent company guarantees can help newer businesses.
Can charities and schools get solar funding?
Yes. Academies, schools and charities can use PPAs where they have long tenure, and some public bodies offer low-cost loans for energy projects. Schools usually need consent from the trust or local authority that owns the building.
Sources
- GOV.UK — Greenhouse gas reporting: conversion factors (DESNZ)
- legislation.gov.uk — The Non-Domestic Rating (Plant and Machinery) (Amendment) (England) Regulations 2022, SI 2022/405
- HMRC — Capital allowances: Annual Investment Allowance and first-year allowances
- Energy Networks Association — G98 and G99 connection requirements
- European Commission JRC — PVGIS photovoltaic yield tool
Price ranges for larger systems, running costs, batteries and PPA rates are indicative market ranges from UK installer, funder and market sources; no official series exists above 50kWp.
Which funding route fits your site?
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