Commercial Solar Financing: All Six UK Routes Compared
Reviewed by the Commercial Solar Finance editorial team — independent advisers (we take no installer or lender commissions). Last reviewed: June 2026.
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 should I compare?
The right lender depends on the route you choose. For a full directory of UK lenders, leasing specialists, PPA developers and brokers — with an indicative rate-comparison table — see our dedicated guide to commercial solar finance companies. This page focuses on the six financing routes themselves and which one fits your tax position and cashflow.
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
See the routes worked through with figures in our commercial solar finance case studies, or explore capital free commercial solar.
Commercial solar financing by business type: owner-occupier, tenant, public body & multi-site
The best financing route depends less on the panels and more on who you are – whether you own the building, whether you pay corporation tax, and how many sites you run. The same 250kWp system is financed very differently by an owner-occupied manufacturer, a retail tenant, an NHS trust and a multi-site logistics group. Match your situation to the row below, then read the note beneath it.
| Business type | Typical best-fit route | Key constraint | Tax / AIA position |
|---|---|---|---|
| Owner-occupier (owns building & trades from it) | Capital purchase, green loan or hire purchase | Few – full control of the roof and the asset | Claims 100% AIA (special-rate plant, up to £1m); the asset adds to property value |
| Tenant / leaseholder | PPA or operating lease; green loan only if the lease term comfortably exceeds payback | Needs landlord consent; split-incentive problem; fixtures at lease end | Can claim AIA on plant it funds and uses in its trade – only if it holds a qualifying interest and the lease documents ownership |
| Public body (NHS, council, university, academy / MAT) | PSDS grant + Salix 0% loan (England); devolved equivalent elsewhere | Generally pays no corporation tax | AIA has no value (no tax to relieve); grant funding is the value driver instead |
| Multi-site / group of companies | Portfolio PPA, master lease or framework asset finance; phased capital purchase | Single £1m AIA shared across the whole group; per-site metering (no cross-site netting) | Spend over £1m in one period drops to 50% first-year allowance + 6% WDA on the residue |
Tenants: the split-incentive problem (and how to solve it)
A tenant benefits from lower bills but does not own the roof; the landlord owns the roof but does not pay the bills. Three ways round it: (1) a PPA or operating lease that sits with the occupier and can be assigned or removed at lease end; (2) a landlord-funded install recovered through a green-lease clause or service charge; or (3) the tenant funds it directly and claims the AIA – but only where the lease term comfortably exceeds the payback and the lease sets out what happens to the panels at the end. Under the CAA 2001 fixtures rules only one party can claim allowances on a given fixture, so agree a capital-allowances / fixtures election in the lease before you install.
Public bodies: why the tax reliefs do not apply to you
NHS trusts, councils, universities, academies and MATs generally pay no corporation tax, so the AIA and the 50% first-year allowance that drive the commercial routes have no value to you. The value driver flips to grant funding: in England the Public Sector Decarbonisation Scheme (delivered by Salix Finance) provides capital grants, with Salix interest-free loans covering the balance – a package repaid from energy savings that no commercial route can match. Scotland and Wales run their own Salix-delivered public-sector programmes (see the regional section below).
Multi-site groups: the shared-AIA trap
The £1m AIA is a single allowance shared across a group of companies and across companies under common control – not £1m per site. A retailer rolling out solar across 15 branches at £120k each (£1.8m) in one accounting period claims 100% AIA on only the first £1m; the remaining £800k gets the 50% special-rate first-year allowance with 6% WDA on the residue (illustrative). Phasing the rollout across two accounting periods can preserve full 100% relief on more of the spend. Groups also cannot net export from one site against import at another – each meter is billed separately – so portfolio PPAs and master leases are structured site-by-site under one master agreement. See how this plays out for retail and property portfolios.
Commercial solar financing UK: regional availability & solar financing companies
A common question is whether commercial solar financing differs across the UK. The answer: the commercial routes are UK-wide, but the export and grant layers are devolved. Where you install changes the incentives, not the finance itself.
| Funding layer | England | Scotland | Wales | N. Ireland |
|---|---|---|---|---|
| Green loans, HP, finance / operating leases, asset finance, PPAs | Yes | Yes | Yes | Yes |
| SEG export payments | Yes | Yes | Yes | No – separate NI regime |
| Public-sector grant / 0% loan scheme | PSDS (Salix) | Scottish public-sector fund (Salix) | Wales Funding Programme (Salix) | Outside PSDS |
Commercial finance is UK-wide. Green loans, hire purchase, finance and operating leases, asset finance and PPAs are offered by banks, asset-finance houses and independent PPA developers across all four nations. There is no postcode restriction – pricing turns on your covenant strength and project size, not your location.
The export layer is regional. The Smart Export Guarantee (SEG) applies in Great Britain only; Northern Ireland sits outside SEG and has its own export-payment arrangements. Because export income affects PPA and self-consumption economics, NI projects should model export separately rather than assume a GB SEG rate.
The grant layer is devolved. The PSDS covers public bodies in England; Scotland and Wales run their own Salix-delivered public-sector programmes on separate budgets and eligibility rules. Northern Ireland public bodies fall outside PSDS entirely.
Choosing between solar financing companies
The UK market splits into four provider types: high-street & challenger banks (green loans and general corporate borrowing); asset-finance houses and brokers (HP, finance and operating leases); PPA developers and funds (zero-capex generation); and Salix (public-sector grants and 0% loans). Each is incentivised to sell its own product, so a bank quote and a PPA quote are rarely compared on equal terms. As an independent adviser we are not a lender – we model every route across all four provider types so the recommendation follows your numbers, not a commission. For a provider directory with indicative rates, see our guide to commercial solar finance companies.
Is commercial solar financing available across the whole UK?
Yes. The commercial routes – green loans, asset finance, leases and PPAs – are available UK-wide. Only the SEG export layer (Great Britain only) and the public-sector grant schemes (devolved to each nation) differ by location.
Are there solar financing companies covering Scotland, Wales and Northern Ireland?
Yes. Banks, asset-finance houses and PPA developers operate across all four nations; project pricing depends on covenant strength and size, not region. The only nation-specific bodies are the Salix-delivered public-sector schemes in England, Scotland and Wales.
See also: financing solar across multiple sites across a portfolio or estate.
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