The right funding choice starts with your priorities
Commercial solar can be purchased outright or funded through a loan, lease or Power Purchase Agreement (PPA). Each option changes the balance between upfront cash, ownership, ongoing responsibilities and contractual commitments.
Compare options for the same proposed system and production assumptions. Otherwise, differences in system design can make one funding method appear better than another for the wrong reasons.
Outright purchase and finance
A capital expenditure (CapEx) purchase uses available funds to buy the system. It can suit a business that wants asset ownership and has sufficient cash, but it also leaves the owner responsible for operating costs and equipment replacement outside warranty.
- Loan: the business generally owns the system while making repayments. Include interest, fees and maintenance in the cash-flow comparison.
- Lease: equipment ownership and end-of-term purchase options depend on the agreement. Review any balloon payment, transfer terms and maintenance responsibilities.
- Tax treatment: ask your accountant how ownership, depreciation, interest or lease payments apply to your business. Do not assume every agreement has the same tax outcome.
What a PPA changes
Under a PPA, a provider typically installs, owns and operates the solar system, while the business buys the electricity it generates under an agreed contract. This can reduce the need for upfront capital and shift some operating responsibilities to the provider.
Review the electricity rate, annual price adjustments, minimum purchase obligations, maintenance provisions and what happens if you relocate or sell the business. A lower starting energy rate is only one part of a long-term contract.
Check cash flow, not just advertised payback
A financed system is cash-flow positive only when the savings, after ongoing costs, exceed the repayments over the period being assessed. Seasonal generation, downtime and changes in tariffs can affect this result.
Request a comparison showing total payments, expected net savings, ownership at the end of the agreement and exit costs. If you lease the premises, confirm landlord approval and align the solar commitment with your tenancy before signing. Obtain financial and legal advice for the final decision.