Commercial / Green Loan

The commercial or green loan route in more detail

A commercial or green loan sits at the ownership end of the funding spectrum. Instead of renting the system or spreading its cost inside a lease, you borrow a cash sum, buy the array outright, and repay the borrowing on its own schedule. From the day the installation is energised you own the asset in full, which means every unit of generation, every pound of avoided grid cost, and any export income belongs to your business rather than to a funder. The loan and the solar system are two separate things: one is a liability you service, the other is an asset that works for you.

For businesses that have the balance sheet to carry debt and want the strongest long-term return, this is often the most efficient route. It suits owners who would rather pay interest for a few years than share the savings with a third party for a decade or more.

How it works in practice

You agree a facility with a bank or specialist lender to cover the installed cost of the system, sometimes with a modest deposit and sometimes at the full amount. Terms typically run from 3 to 15 years, so you can match the repayment period roughly to the payback profile of the system and to how long you expect to occupy the building. Pricing is usually set off a reference rate such as the base rate plus a margin, with the margin reflecting your credit profile, the loan size, and any security offered.

Some lenders market preferential green terms for energy-efficiency and renewable projects, which can mean a slightly reduced margin or lighter fees. This is not universal, and green pricing should be treated as a possible benefit to ask about rather than something to assume. Because the loan is a general borrowing facility, it may sit alongside covenants or require security over the asset or wider business assets, so the small print matters as much as the headline rate.

Who it suits, and who it does not

A loan tends to suit established businesses with a reasonable credit history, headroom to take on debt, and a long horizon in the premises. If you plan to stay in the building for the useful life of the panels, ownership from day one gives you the full economic upside and a clean asset once the loan is repaid.

It is a weaker fit if your priority is protecting borrowing capacity for other purposes, if existing covenants restrict new debt, or if you would rather keep the project off balance sheet. In those cases a power purchase agreement or an operating lease may line up better with your objectives. Comparing a loan against those alternatives on a like-for-like basis is exactly what a costed quote is for.

The tax and accounting angle

Because you own the system, you claim the capital allowances on the full installed cost. Solar PV is special rate plant, so it does not qualify for 100% full expensing, which is restricted to main-rate assets, nor for the newer 40% first-year allowance. It does qualify for the Annual Investment Allowance, giving 100% first-year relief on qualifying spend up to £1m, which comfortably covers most commercial installations. Where spend exceeds that cap, companies can use the 50% special-rate first-year allowance on the excess, with the remaining balance written down at 6% a year.

Ownership also means you keep all the savings and any export income, including payments under the Smart Export Guarantee, which replaced the Feed-in Tariff and pays for exported power on systems up to 5 MW. The interest element of your loan repayments is a deductible business expense. VAT on commercial solar is charged at 20% and is reclaimable if you are VAT registered; the 0% domestic rate does not apply to commercial projects. Rooftop solar used for self-consumption is also 100% exempt from business rates in England from April 2022 to March 2035.

This is general information rather than tax advice, and reliefs depend on your circumstances and how the project is structured. Confirm the position with your accountant before you commit.

What to watch for

The trade-offs are real. A loan adds debt to the balance sheet and an interest cost that a fully funded route such as a PPA avoids. Security or personal guarantees may be requested, and covenants can constrain future borrowing. Compare the total cost of the loan, including fees and interest over the term, against the modelled savings so you can see the genuine net position rather than just the monthly repayment. It is also worth checking early-repayment terms in case you want to clear the facility ahead of schedule.

You can test the numbers before committing using our finance calculator and check the underlying figures on the payback and ROI page.

Getting a costed comparison

We are a comparison and quote service, not a lender or a financial adviser. We connect UK businesses with vetted MCS-certified installers and funders, then bring back costed finance quotes so you can weigh a green loan against every other route on the same terms. If you want to see how ownership through borrowing stacks up in real numbers for your site, compare the routes side by side on our finance options compared page, then request your quotes to get costed figures tailored to your building and usage.