Commercial Solar Financing: All Six UK Routes Compared
Commercial solar financing is the set of methods UK businesses use to fund a solar PV installation without paying the full upfront capital cost. In 2026, there are six distinct financing routes — from green loans at 5.9% APR to zero-capital Power Purchase Agreements (PPAs). Each route has different cashflow, tax, and balance-sheet consequences. This guide explains every route and tells you which one fits your business.
Quick answer: commercial solar financing in 30 seconds
Six routes: (1) Capital purchase — pay upfront, claim 100% AIA, own from day one. (2) Green loan — borrow at 5.9–9%, claim AIA, repay from savings. (3) Hire purchase — spread cost, own on final payment. (4) Finance lease — fixed rental, on-balance-sheet, lessor claims AIA. (5) Operating lease — off-balance-sheet rental, no capital. (6) PPA — zero capital, zero maintenance, pay per kWh generated. Public sector? Use PSDS grant + Salix 0% loan instead.
The six commercial solar financing routes compared 2026
| Financing route | Upfront cost | Monthly payment | Who owns the panels | Tax: capital allowances | Best suited to |
|---|---|---|---|---|---|
| Capital purchase (own outright) | 100% of installed cost | None | You (from day one) | 100% AIA year one (or 50% FYA) | Businesses with strong cash reserves and high taxable profit |
| Green loan | Nil | £2,100–£3,200/month per 250kWp (7% APR, 8yr) | You (from day one) | 100% AIA year one | Businesses wanting ownership + AIA without using all working capital |
| Hire purchase (HP) | 0–20% deposit | Slightly lower than green loan | You on final payment | AIA on completion of HP (when title passes) | Businesses wanting AIA at system completion, not at order |
| Finance lease | Nil to first rental | Fixed rental for term (typically 5–10yr) | Lessor owns throughout | Lessor claims AIA (not you) | Businesses wanting fixed monthly cost, on-balance-sheet finance (IFRS 16) |
| Operating lease | Nil | Lower than finance lease | Lessor owns throughout | Lessor claims AIA (not you) | Businesses wanting off-balance-sheet treatment, no residual risk |
| Power Purchase Agreement (PPA) | Zero | Pay per kWh generated (discounted rate) | Developer owns throughout | Developer claims AIA | Businesses wanting simplicity, zero capital, zero maintenance responsibility |
How to choose the right commercial solar financing route
Decision 1: Do you want to own the solar system?
If yes — capital purchase, green loan, or hire purchase. Ownership lets you claim Annual Investment Allowance (100% first-year corporation tax relief), include the asset on your balance sheet (boosting net assets), and pocket 100% of the energy saving without paying a leasing margin or PPA discount. Ownership also simplifies building sales — solar adds to the property value and transfers with the building. If no — operating lease or PPA. Non-ownership simplifies accounting, removes maintenance responsibility, and typically requires less credit approval than a loan or HP.
Decision 2: Is a zero-capital structure essential?
PPA and operating lease both require zero capital. PPA is better for large, constant-consumption sites (above 200kWp at 250,000+ kWh/year) where the developer's return is predictable. Operating lease is better for businesses that want a fixed monthly payment (not variable per kWh) and off-balance-sheet treatment under UK GAAP/FRS 102. Both routes sacrifice the Annual Investment Allowance to the developer/lessor — this is the main cost of zero-capital structures for profitable businesses (the AIA on a £500k system is worth £125,000 in year-one CT relief at 25%).
Decision 3: Public sector body?
If you are an NHS trust, council, university, academy, or other listed public body: ignore the six commercial routes above. The PSDS (Public Sector Decarbonisation Scheme) provides capital grants covering 60–80% of eligible solar project costs. Salix Finance provides 0% interest loans for the remaining 20–40%. Together, these can deliver a fully-financed solar system with loan repayments met entirely from energy savings — effectively free solar for the public body. This is categorically the best commercial solar financing route for public bodies — it cannot be beaten by any commercial structure.
Commercial solar financing: cashflow comparison 2026
The table below compares the 5-year net cashflow for a 250kWp commercial solar installation (installed cost £212,500; annual energy saving £87,000 at 35p/kWh) under each financing route.
| Route | Year-one CT benefit | Year-one cashflow (net) | Year 2–5 annual cashflow (net) | 5-year net cumulative |
|---|---|---|---|---|
| Capital purchase (AIA) | £53,125 CT saving | £87,000 saving – £212,500 capex + £53,125 CT = –£72,375 | £87,000/yr (no repayment) | £+275,625 |
| Green loan (7% APR, 8yr) | £53,125 CT saving | £87,000 – £29,600 loan (12 mths) + £53,125 CT = £+110,525 | £87,000 – £29,600 loan = £57,400/yr | £+340,525 |
| Hire purchase (8% APR, 7yr) | £53,125 (at handover) | £87,000 – £33,600 HP + £53,125 CT = £+106,525 | £87,000 – £33,600 = £53,400/yr | £+320,525 |
| Finance lease (7%, 10yr) | Nil (lessor claims) | £87,000 – £23,400 lease = £+63,600 | £63,600/yr | £+318,000 |
| Operating lease (7%, 10yr) | Nil | £87,000 – £25,200 lease = £+61,800 | £61,800/yr | £+309,000 |
| PPA (25% discount to 35p = 26.25p/kWh saved) | Nil | £63,250 net saving (no repayment, but lower saving) | £63,250/yr | £+316,250 |
Key insight: green loan finance typically produces the best 5-year cumulative cashflow for profitable businesses because the AIA benefit (year-one CT relief) is added to the energy saving in year one, while loan repayments are lower than the energy saving from year one. Capital purchase is second — better than green loan if cash has no alternative use earning more than the loan interest rate.
Commercial solar financing: frequently asked questions
What is commercial solar financing?
Commercial solar financing refers to the methods UK businesses use to fund a solar PV installation without paying the full upfront capital cost. The six main routes are capital purchase, green loan, hire purchase, finance lease, operating lease, and Power Purchase Agreement (PPA). Each has different tax, balance-sheet, and cashflow consequences — the best route depends on your tax position, cash reserves, accounting treatment, and operational preferences.
Which commercial solar financing companies operate in the UK?
UK commercial solar financing companies include high-street banks (NatWest, Lloyds, HSBC, Barclays, Santander) for green loans; specialist asset finance companies (SMBC Leasing, Nucleus Commercial Finance, Shawbrook) for hire purchase and finance lease; and specialist PPA developers (Lightsource bp, Voltalia, BayWa r.e., Anesco, Regen) for Power Purchase Agreements. Our commercial solar finance companies guide compares the main providers.
How long does commercial solar financing approval take?
Green loan approvals from high-street banks typically take 2–6 weeks (credit assessment, legal review). Specialist asset finance brokers can approve smaller loans (£25k–£250k) in 48–72 hours. PPA agreements take 4–12 weeks to structure (site survey, G99 pre-application, contract negotiation). PSDS grant applications take 4–16 weeks from application to letter of offer. Our approval time guide gives full timelines.
Explore specific financing routes
Find the right solar financing route for your business
We'll model all six financing routes against your specific tax position, cashflow, and accounting requirements — free of charge, no obligation.
Request a free financing review