Comparison · Asset finance vs Green loan

Asset finance vs green loan — UK commercial solar 2026

Asset finance and green loan both let you spread the cost of commercial solar over 5-10 years while preserving FYA tax allowance capture. They differ on speed of decision (asset finance much faster), rate (green loan typically lower), and underwriting flexibility (asset finance more flexible). The right choice depends on time pressure and credit position.

Headline answer

Asset finance wins on speed (24-72 hour decisions vs 4-8 weeks). Green loan wins on rate (typically 1-1.5 percentage points lower APR). For year-end FYA-capture pressure projects: asset finance. For optimising lifetime cost: green loan.

Side-by-side

Criterion	Asset finance (HP/finance lease)	Green loan
Typical APR	7-9% APR	6.5-8.5% APR
Decision speed	24-72 hours indicative; 7-10 days credit committee	4-8 weeks for established customers
Term	3-7 years typical	5-10 years typical
Underwriting flexibility	Higher — accepts wider credit profiles	Stricter — typically requires established trading position
Security	Asset itself (solar PV)	Asset + sometimes additional security/PG
FYA capture	Yes (HP transfers title progressively)	Yes (borrower retains title)
Min ticket	£20-25k+	£100k+ typical, sometimes £50k
Best for	Speed-critical or smaller-ticket projects	Lower-rate optimisation; larger projects

Which one for which situation

Is there year-end FYA-capture pressure or a deadline?
If yes (accounting year-end approaching, FYA deadline pressure, supplier discount window), asset finance's 24-72 hour indicative decisions and 7-10 day full credit can be the difference between hitting the deadline and missing it. The 1-1.5pp APR premium is worth it for speed.
Is the project under £100k?
For smaller projects, green loan minimum tickets often don't apply or rates aren't competitive. Asset finance better fits the scale economics. Most asset finance lenders accept tickets from £20k.
Is your credit position uncomplicated and time uncritical?
For established trading companies with clean credit and no time pressure, green loan optimises rate. The 4-8 week timeline is manageable and the rate saving over 5-7 years is meaningful (£8-15k on a £200k facility).
Do you have an existing asset finance relationship?
If you already have a vehicle, equipment, or plant asset finance facility, adding solar to that facility is often the fastest, simplest route — no new lender vetting, established credit relationship, sometimes pricing concession. Worth checking with your existing asset finance broker before opening a new green loan process.

Asset finance (HP/finance lease) vs Green loan FAQs

Why is asset finance faster than green loan?

Different underwriting models. Asset finance lenders typically run automated credit decisioning on standard-credit applications using third-party credit scoring + accounts review. Green loan lenders typically run human-led credit committee processes with deeper due diligence. The asset itself (solar PV) provides the security in both cases, but mainstream green-lending processes include broader sustainability and ESG diligence that adds time.

Can I have both an asset finance facility and a green loan on different projects?

Yes — they're separate facilities and don't conflict structurally. Some businesses operate solar via green loan for the main installation and use asset finance for ancillary equipment (batteries, EV chargers, monitoring). Coordinate with your accountant on capital allowance claims to avoid double-counting.

Is hire purchase tax-deductible like green loan interest?

Yes — the interest portion of hire purchase payments is tax-deductible as an operating expense. The capital portion isn't (it's the asset cost being repaid). Hire purchase payments split into interest and capital each month, with the interest portion declining over the term as the principal reduces.

What are the typical fees on asset finance vs green loan?

Asset finance: arrangement fee 1-2% of facility, typically. Documentation fees minimal. Green loan: arrangement fee 1-2% of facility plus sometimes drawdown fees and ongoing facility fees. On larger facilities (£500k+), green loan total fees can be modestly higher than equivalent asset finance, though rate is typically lower.

Which is more common for UK commercial solar in 2026?

Green loan is more common for projects above £200k where established trading customers can access mainstream bank lending. Asset finance dominates the £20k-£200k range and the speed-critical / opportunistic deal segment. Both are well-developed UK product categories.

Asset finance (full page)

Hire purchase and finance lease structures for commercial solar.

Green loans (full page)

Specialist green-debt funding for commercial solar projects.

Asset finance lender shortlist

Five categories of UK asset finance lender with rates and decision speeds.

Understanding the key differences

Asset finance and green loans are both debt-based routes to solar ownership, but they differ in structure, security, tax treatment, and lender appetite. The right choice depends on your balance sheet position, the size of the installation, and how you want to record the asset for accounting purposes.

Both products result in your business owning the solar panels, unlike a PPA or operating lease where a third party retains ownership. That ownership is what unlocks Annual Investment Allowance and SEG export income — significant financial benefits over the system lifetime.

What is asset finance for solar?

Asset finance — typically structured as hire purchase (HP) — treats the solar installation itself as security. You pay a deposit (usually 10–20%), then fixed monthly payments over 3–7 years. Legal title transfers to your business on final payment. The asset and corresponding liability appear on your balance sheet from day one under IFRS/UK GAAP.

Asset finance characteristics

Secured against the solar asset itself, lower interest rates than unsecured products (typically 4.5–7% APR), requires deposit, system appears on balance sheet, eligible for AIA from installation date.

Asset finance process

Lender values the solar installation, conducts credit check, issues HP agreement. Process typically takes 2–4 weeks. Many specialist solar lenders understand the asset class well.

What is a green loan for solar?

A green loan is an unsecured or semi-secured term loan specifically for environmental improvements. Under the UK Taxonomy and many lenders green finance frameworks, commercial solar qualifies automatically. Rates typically range from 5.5–9% APR; terms run 5–10 years. No deposit is required in most cases.

Green loan characteristics

Unsecured (no asset collateral required), no deposit, slightly higher interest rate than secured HP, full ownership from day one, AIA eligible, government-backed options available via UKIB green finance.

Green loan process

Standard business loan application — 3 years accounts, management accounts, cash flow forecast. Specialist green lenders may offer preferential rates for strong ESG credentials.

Side-by-side comparison

Factor	Asset Finance (HP)	Green Loan
Security	Solar asset itself	Unsecured / general business charge
Deposit required	10–20% typically	Usually none
Typical APR	4.5–7%	5.5–9%
Typical term	3–7 years	5–10 years
Ownership timing	On final payment (HP)	From day one
Balance sheet	Asset + liability recorded	Liability recorded; asset owned
AIA eligibility	Yes (from installation)	Yes (from installation)
Credit assessment	Asset value + business credit	Business credit + trading history
Flexibility	Less — secured product	More — general purpose loan
Green premium rates	Less common	Common (Triodos, UKIB, green tranches)

Tax treatment comparison

Both products give your business access to the Annual Investment Allowance, which allows 100% of the system cost to be deducted against taxable profits in year one. For a 200kWp system at £200,000, that is a £50,000 Corporation Tax saving at 25% — regardless of whether you used HP or a green loan.

One nuance: under hire purchase, if your business is VAT-registered, you pay VAT on each HP instalment (VAT on goods element), whereas with a green loan you pay VAT upfront on the full invoice (then reclaim it in the next return). This affects cash flow in the short term but is neutral over time.

Which is better for your business?

Choose asset finance if

You want the lowest possible interest rate and are comfortable with a deposit, your system is £50,000+ where the secured rate differential is meaningful, or your lender has specific solar HP products with streamlined underwriting.

Choose a green loan if

You want to preserve cash with no deposit, you prefer the flexibility of an unsecured product, you qualify for preferential green rates from mission-led lenders like Triodos or UKIB, or your system is under £50,000.

Combined approach

Some businesses use a green loan for the first 20% (avoiding HP deposit complexity) and finance the remainder through a larger HP facility. This is unusual but worth exploring with a specialist broker.

Lender landscape in 2025

Asset finance lenders for solar

Siemens Financial Services, Propel Finance, Lombard (NatWest), BNP Paribas Leasing, Investec Asset Finance. Typical £50k–£5m ticket sizes.

Green loan lenders for solar

Triodos Bank, Ecology Building Society, UK Infrastructure Bank green tranches, Metro Bank, and specialist solar finance brokers.

Independent brokers

A specialist solar finance broker can access both product types and negotiate competitive terms. Fee typically 1–2% of facility, paid by lender.

Need this comparison run on your specific numbers?

We model both structures side-by-side using your postcode, half-hourly demand profile, accounting position, and balance sheet preferences. Five working days from enquiry to indicative comparison.

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