Types of commercial solar finance company
Four distinct categories of organisation provide commercial solar finance in the UK. Each has different funding models, ownership structures, and pricing mechanisms — understanding the differences is the first step to choosing the right provider.
1. Green and sustainability lenders
Major UK banks now operate dedicated green lending desks that fund solar PV under sustainability-linked or green loan frameworks. Mainstream providers include NatWest Green Loans, Lloyds Green Lending, HSBC Sustainable Financing, and Barclays Green Finance. Specialist green lenders such as Triodos Bank and Ecology Building Society focus specifically on environmental projects and may offer more flexible criteria for community or co-operative structures.
Under a green loan, your business borrows, owns the system outright, and claims the 50% First Year Allowance (FYA) or 100% Annual Investment Allowance (AIA) — typically the strongest after-tax outcome available. Rates range from 4–8% p.a. over 7–15 years depending on credit quality and facility size.
2. Asset finance and equipment leasing specialists
Specialist asset finance lenders — Aldermore, Shawbrook, Close Brothers Asset Finance, and Hitachi Capital — offer hire purchase (HP) and finance lease products specifically for capital equipment including solar PV. They typically move faster than banks (credit decisions in 2–3 weeks), require less documentation, and can accommodate businesses with shorter trading histories.
For operating leases (where the lessor retains ownership and the FYA), dedicated solar leasing houses are the typical providers: the lessor structurally needs to be able to use the tax allowance, which rules out loss-making or low-tax businesses as lessors. Independent lessors include structured finance vehicles set up specifically for the UK solar lease market.
3. PPA aggregators and off-take providers
A Power Purchase Agreement is funded by an aggregator who installs the system at no cost to the business, owns it throughout the term (typically 15–25 years), and sells the generated electricity to the host at a pre-agreed p/kWh discount to the grid rate. Providers include large energy retailers (Octopus Energy for Business, EDF Renewables) and specialist solar PPA vehicles.
PPAs require no capital outlay but deliver the smallest long-term saving, and the host does not own the asset at term end (unless a purchase option is exercised). They are most appropriate for buildings with complex ownership, poor credit access, or where off-balance-sheet treatment of the full system cost is essential.
4. Solar finance brokers and independent advisers
Brokers panel multiple lenders and present competing terms. They are paid a procuration fee (typically 1–3% of the facility) by the chosen lender — this is a material cost to the deal, though it is often embedded in the rate rather than itemised. Independent financial advisers charge a transparent advisory fee and are not dependent on which lender is chosen. Both can save time compared to approaching multiple lenders directly, but the commission structure of a broker creates an incentive to recommend the lender paying the highest fee rather than the most appropriate product.
How to compare commercial solar financing companies
When evaluating competing proposals from commercial solar finance companies, assess the following five dimensions:
- Effective cost of borrowing — the APR or all-in implicit interest rate, including arrangement fees amortised over the term
- Tax position — whether your business retains First Year Allowance or Annual Investment Allowance eligibility, which can offset 25–50% of the system cost in Year 1
- Balance sheet treatment — IFRS 16 requires finance leases and most operating leases to be capitalised; true off-balance-sheet treatment requires careful structuring
- Ownership and residual risk — who bears the cost of underperformance, inverter replacement, or early termination
- After-tax IRR — the single metric that integrates all of the above: model the after-tax cash flows over 25 years under each lender's terms and compare
| Company type | Typical rates | Typical term | Owns system? | Best for |
|---|---|---|---|---|
| Green bank loan | 4–8% p.a. | 7–15 years | You | FYA + balance-sheet ownership |
| Asset finance / HP | 5–9% p.a. | 3–7 years | You (end of term) | Shorter payback, AIA claim |
| Operating lease | Fixed rental | 10–20 years | Lessor | Off-balance-sheet, nil capex |
| PPA provider | p/kWh discount | 15–25 years | Provider | Zero capital, instant savings |
| Finance lease | 5–8% implicit | 5–15 years | Lessor (lessee risk) | On-balance-sheet, tax depreciation |
The table above shows indicative figures only — actual terms depend on your business credit profile, system size, and the lender's current book appetite. Independent modelling using your actual accounts and energy bills is essential before committing to any structure.