Skip to content
Commercial Solar Finance UK · Independent
Q&A · How it works

How does commercial solar finance work? — UK 2026

Commercial solar finance is the set of mechanisms a UK business uses to fund a solar PV installation that won't be paid for entirely upfront from cash. There are seven principal structures. Each works differently on three dimensions: who pays the capex, who owns the asset, and who captures the tax allowances. This guide walks through each in plain English.

The three core questions every finance structure answers

Every commercial solar finance structure resolves three questions:

  1. Who pays the upfront capital expenditure?

    Either you (capital purchase, AIA-eligible operations) or a third party (green loan lender, asset finance lessor, PPA developer). The third-party route avoids capex outflow but adds finance cost over time.

  2. Who owns the asset?

    Either you (capital, green loan, asset finance, finance lease) or a third party (operating lease, PPA). Ownership matters for balance sheet treatment, end-of-term position, and operational responsibility.

  3. Who captures the tax allowances?

    Either you (where you have legal title at first use — capital, green loan, finance lease, hire purchase) or the lessor / developer (operating lease, PPA). Tax allowances are worth typically 17-20% of capex on profitable trading companies — substantial.

The seven structures, explained

F01 · Capital purchase

Pay cash, own outright

You pay the full installation cost upfront. You own the system. You capture the FYA (50%) and special-rate pool tax allowances. Lowest lifetime cost but requires capital. Capital purchase →

F02 · Green loan

Borrow to own

A green-debt lender funds the installation as a loan. You own the system, capture the tax allowances, and repay over 7-10 years. Interest is tax-deductible. ~£40k extra cost over 7 years vs capital purchase. Green loans →

F03 · Finance lease

Lease with ownership pass-through

A leasing company owns the system but transfers tax ownership and capital allowances to you. You pay monthly rent for 7-10 years. You capture FYA. Functionally similar to a green loan with leasing-company structure. Finance lease →

F04 · Operating lease

Off-balance-sheet rent

A leasing company owns the system. You pay monthly rent for 5-8 years. The lessor captures the tax allowances. Off-balance-sheet under FRS 102 small-entity reporting. Operating lease →

F05 · Power Purchase Agreement (PPA)

Pay per kWh consumed

A PPA developer installs and owns the system on your roof. You pay per kWh consumed at a discounted rate (typically 14-17p vs 22p grid). Zero capex, lowest year-1 effort, lowest lifetime saving. 20-25 year contracts. PPA →

F06 · Asset finance / hire purchase

Spread the cost over the asset

A specialist asset finance lender funds the installation; you make monthly payments over 3-7 years. Title transfers progressively. You capture FYA. Faster credit decisions than green loans. Asset finance →

F07 · Battery storage finance

Add storage to the project

Battery storage adds £400-550 per kWh capacity to the project capex. Funded the same way as the solar — capital, green loan, or asset finance. Specific scenarios where battery delivers material project value. Battery storage →

A worked numerical example

For a 250 kWp commercial solar system at £200,000 turnkey on a profitable UK trading company:

StructureYear-1 cashMonthly25-yr cumulative
Capital purchase-£135k£0£1.05m
Green loan (7yr at 7%)£30k£3,019£999k
Finance lease (8yr at 7.5%)£33k£2,777£986k
Operating lease (8yr at ~8%)£8k£2,940£1.02m
PPA (20-yr at 16p/kWh)£15k£2,375 (PPA cost)£548k

Capital purchase has the most negative year-1 position (capex outflow exceeds savings + tax) but the highest 25-year benefit. PPA has the most positive year-1 (no capex) but lowest lifetime benefit. The right structure depends on your specific tax position, capital availability, and contractual horizon.

Run your own numbers

Open the interactive calculator →

Related questions

How long does it take to arrange commercial solar finance?
Capital purchase is the fastest (no finance arrangement). Green loan from mainstream banks: 4-8 weeks for established customers. Asset finance: 24-72 hours indicative, 7-10 days credit committee. PPA: 6-12 weeks contract negotiation. Operating lease: 4-8 weeks. Plan around the longest delay you face — typically the DNO connection process for systems above 200 kWp.
Can I combine multiple structures on the same project?
Yes. Common blends: capital purchase + green loan (preserve some working capital while saving interest); cash + asset finance (small balance flexible-funded); PPA on roof + capital on adjacent ground-mount. We model blended structures where the constraint pattern fits hybrid solutions.
What's the typical credit threshold for green loan or asset finance?
Mainstream UK clearing banks typically require established trading position (3+ years), positive net assets, and clean credit history for green loan. Asset finance lenders accept wider credit profiles — including some loss-making businesses with adequate trading history. Specialist lenders (Triodos, Charity Bank) accept charity-sector and B-Corp borrowers.
Are commercial solar finance products FCA-regulated?
Most commercial solar finance falls outside FCA regulation because the borrowers are limited companies (B2B) rather than consumers. Some asset finance brokers and lenders are FCA-authorised for other purposes. PPA developers operate outside FCA scope. Where regulation applies (rare), we only deal with FCA-authorised counterparties.
How does the 50% First Year Allowance interact with these structures?
FYA is captured by whoever has legal title at first use of the asset. Capital purchase, green loan, finance lease, asset finance: borrower / buyer captures FYA. Operating lease, PPA: lessor / developer captures FYA. The £25k year-1 tax saving (£200k system at 25% main rate) substantially affects lifetime economics — make sure your structure preserves capture if your tax position supports it.

Continue reading

All seven finance structures

Detailed pages for capital, green loan, finance lease, operating lease, PPA, asset finance, battery storage.

Interactive calculator

Run all five main structures against your project numbers. State-preserving share URLs.

Finance structure comparison

Six-structure comparison table with worked numbers.

Want this applied to your specific situation?

We model the relevant finance structures against your project numbers. Five working days from enquiry to indicative comparison across capital purchase, green loan, lease, and PPA.

Request a finance review