Commercial solar finance options compared
Every way to fund commercial solar, lined up on the measures that actually decide it: upfront cost, ownership, tax relief, balance-sheet impact and lifetime return.
Every funding route, side by side
| Funding route | Upfront | Who owns it | Term | Balance sheet | You get tax relief | Best for |
|---|---|---|---|---|---|---|
| Capital Purchase (Cash) | Full installed cost | You, from day one | No finance term | On balance sheet (owned asset) | You claim AIA (100% up to £1m) or the 50% special-rate FYA on the full cost, plus reclaim VAT if VAT-registered | Cash-rich businesses that want the maximum lifetime return and full tax relief |
| Power Purchase Agreement (PPA) | £0 | The PPA provider, throughout the term | Typically 10 to 25 years | Designed to be off balance sheet, confirm under IFRS 16 / FRS 102 | The provider owns the asset, so the provider claims the allowances and export income, not you | Businesses that want cheaper power with no capex and no maintenance, and long site tenure |
| Hire Purchase | Deposit only (often ~10%) | The lender during the term, you at the end | Typically 2 to 7 years | On balance sheet from the outset | Treated as owner, so you claim AIA / 50% FYA on the FULL cost in year one, even though you pay over time | Businesses that want to own the asset and capture the tax relief without paying all cash upfront |
| Asset Finance | Low or none, deposit varies | Depends on structure (HP: you at end; lease: lessor) | Typically 3 to 10 years | On balance sheet (HP or finance lease) | Under HP or finance-lease structures you typically claim capital allowances; the finance charge is separately deductible | Businesses that want the equipment to be the security rather than pledging other collateral |
| Operating Lease | £0 to low | The lessor, throughout | Typically 5 to 15 years | Historically off balance sheet, tightening under IFRS 16 / FRS 102 | Capital allowances accrue to the lessor, not you; your rentals are fully deductible as revenue expenses | Businesses prioritising off-balance-sheet treatment and P&L smoothing over ownership |
| Commercial / Green Loan | £0 (loan funds the purchase) | You, from day one | Typically 3 to 15 years | Asset on balance sheet; loan shown as debt | As owner you claim AIA / 50% FYA on the full cost; loan interest is deductible | Businesses that want full ownership and tax relief without depleting cash, and prefer a clean debt instrument |
| No Upfront Cost / Fully Funded | £0 | Depends on the underlying structure | Varies by structure | Depends on the underlying structure | Depends on the underlying structure, always check who gets the allowances and export income | Businesses that cannot or do not want to commit capital but still want solar working now |
Balance-sheet treatment depends on your accounting framework (IFRS 16 or FRS 102) and the exact structure; confirm with your accountant. Last updated July 2026.
How to choose
Sources and official guidance
Figures on this page are based on the following primary sources. This is general information, not tax advice.
Further reading
Comparing the routes: common questions
Can I get commercial solar with no upfront cost?
Yes. Either a PPA, where a third party owns the system and you buy the cheaper power, or 100% finance, a green loan, hire purchase or lease repaid from your energy savings. Both aim to be cash-flow positive from day one. The trade-off is that you give up some ownership, tax relief or lifetime return in exchange for zero capex.
Is a solar PPA cheaper than buying outright?
Cheaper on day-one cash because there is zero capex, but more expensive over the asset's life. Buying outright gives the highest lifetime return because you keep all the savings, export income and tax relief. A PPA has the lowest lifetime return because the funder's margin comes out of your savings. Asset finance sits in between.
Does a lease keep solar off my balance sheet?
An operating lease traditionally does, but under IFRS 16 most leases now go on the balance sheet and FRS 102 treatment is tightening. A finance lease and hire purchase are on the balance sheet. Confirm the current treatment with your accountant before relying on off-balance-sheet as a benefit.
Who gets the tax relief and export income under a PPA?
The PPA provider, because they own the asset. You get cheaper power, not the capital allowances or the SEG export payments. If capturing the tax relief matters to you, own the system through cash, a loan or hire purchase.
With hire purchase, do I still get the capital allowances even though I pay over time?
Yes. Under hire purchase you are treated as the owner from the start, so you can claim the AIA or 50% first-year allowance on the full cost in year one even though you are paying in instalments. The interest element is separately deductible.
What are typical finance terms and rates for commercial solar?
It depends on the route: hire purchase and asset finance are commonly 3 to 7 years, green loans 3 to 15 years, PPAs 10 to 25 years, and operating or finance leases about 5 to 15 years. Rates are priced off the Bank of England base rate plus a credit margin, so verify live pricing, which moves with rates and your covenant strength.