Solar Power Financing Options for Businesses: An Overview
Introduction:
In the drive toward decarbonization, businesses are increasingly adopting solar energy to reduce their reliance on traditional power sources. With electricity prices rising and discoms (distribution companies) charging industrial consumers an average of Rs. 8/unit across most states, solar power is becoming an attractive solution for companies looking for a cost-effective and sustainable energy alternative.
By investing in solar energy, businesses can enjoy lower energy costs, insulation from future energy price hikes, and a stronger sustainability profile—a growing priority for consumers and investors alike. This article explores the financing options available for commercial and industrial (C&I) solar projects, focusing on how companies can benefit from both capital expenditure (CAPEX) and operational expenditure (OPEX) models to fund their transition to using more solar power.
Why Invest in Solar for Your Business?
The benefits of solar panel financing for businesses
Cost Savings
One of the most significant advantages of solar panel financing is the immediate and long-term savings on your electricity bill. Using solar power can significantly cut or even eliminate electricity bills. Despite the high initial costs, businesses can often enjoy lower, long-term power bills, resulting in significant savings. In particular with the help of financing, the savings can outweigh the up-front costs by a considerable margin.
Energy Independence
With solar power, businesses become less reliant escalating energy prices and the grid, which leads to more predictable and stable operating costs. Additionally, solar power can help businesses gain a competitive edge by allowing them to reduce their energy costs, and become more attractive to their potential customers.
Environmental Impact
Solar power is a cleaner, more sustainable alternative to fossil fuels. By switching to solar energy, businesses can dramatically reduce their carbon footprint and demonstrate a commitment to corporate social responsibility.
Branding Opportunities
Companies that adopt solar power can enhance their reputation as environmentally responsible businesses. Consumers and investors are increasingly drawn to brands that prioritize sustainability, making solar energy a valuable marketing tool.
Solar Financing Options for Businesses (Commercial and Industrial)
The upfront cost of installing solar panels often deters companies from going solar, but there are multiple financing options now available to ease this burden. In terms of rooftop solar financing, there are several options available. Solar vendors also offer financing options along with their rooftop solar products, not just nationalized banks and NBFCs. A number of regional sahakari banks also lend money to these rooftop solar projects at attractive interest rates.
Solar Loans from Banks and Other Financial Institutions
There have been a variety of financial institutions entering the solar market over the years, illustrating the sector’s maturity in terms of financing. Typically, solar projects are funded with a combination of equity and debt.
Some of the most popular C&I solar financing methods and products by banks and other finance institutions are term loans, working capital loans, bridge loans and lines of credits.
Solar loans offer static interest rates that can range from 5 to 10 years, and allow businesses to own their solar systems after completion of their loans without any reservations.
Other options such as:
Power Purchase Agreements (PPAs)
A third-party provider owns, installs, and maintains the solar system, under a PPA. Solar per unit is priced lower than the current utility rate, which provides immediate savings.
Solar Leases
Solar leases involve a third party owning the system, similar to PPAs. Businesses pay a fixed monthly lease payment unlike buying the electricity which also eliminates upfront costs and provides predictable monthly expenses.
Property Assessed Clean Energy (PACE) Financing
A government-backed program which is tied to the property rather than the business, with terms often extending up to 30 years.
Commercial Green Loans
Green loans are specifically designed for energy-efficient projects, including solar installations through some banks and financial institutions.
Challenges for MSMEs in Solar Financing
Micro, Small, and Medium Enterprises (MSMEs) face unique challenges when accessing solar financing. The high upfront cost of rooftop solar systems, combined with difficulties in securing financing, has been a significant barrier. Financial institutions often prefer borrowers with strong credit histories, leaving many MSMEs unable to tap into the available resources.
Key challenges include:
Lack of creditworthy MSMEs: Due to a lack of historical financial data and payment track records, lending institutions can be hesitant to lend to MSMEs. This lack of data makes it difficult for lenders to assess the risk of lending to MSMEs. As a result, MSMEs often have difficulty accessing capital, which affects their ability to grow and expand.
Inability to Provide Collateral: To mitigate risks, banks impose strict lending criteria, often requiring collateral, particularly for larger loans. However, many MSMEs struggle to provide adequate collateral. In many cases, their existing assets are already pledged, making it challenging for them to secure additional loans.
Long-term concerns regarding MSMEs’ stability: In some cases, determining the future viability and sustainability of an MSME’s business can be difficult, which makes lenders wary of lending to them.
Financing Trends for Solar
Over the past few years, the number of rooftop solar lenders has more than doubled in the MSME segment. Loan disbursing entities include public and private sector banks as well as non-banking financial companies and solar vendors themselves. In addition, some international investment firms are offering rooftop solar financing options to MSMEs.
Orb Energy’s In-House Solar Financing Solutions for MSMEs
Orb Energy offers a one-stop, vertically integrated solution, covering everything from financing to installation and maintenance. Orb has financed close to 100MW of solar systems under its in-house financing model, benefiting approximately 300 customers so far.
Key features of Orb’s financing solutions include:
- No Collateral Requirement
- Flexible Down Payments: 0-25%
- Competitive Interest Rates: 12% (reducing)
- Flexible Tenure: 6 months to 6 years
- Quick Loan Disbursal: 7-10 days
- No Prepayment or Pre-closure Charges
With Orb’s financing options, businesses can immediately start saving on electricity, paying Equated Monthly Installments (EMIs) that are less than their current monthly electricity bills – meaning they start saving on day one!
CONCLUSION
There are several advantages for businesses that choose to invest in solar energy:
- lower electricity bills;
- fixed electricity costs into the future and better predictability of costs;
- increased sustainability credentials;
- superior brand recognition.
To help manage their budgetary requirements businesses can now choose from a wide range of solar power financing alternatives. There has never been an easier time to switch to solar electricity, whether it is through cash purchases, solar loans, PPAs, leases, PACE financing, or green bonds.
If you’re a business owner thinking about going solar, it’s important to research the available financing options to see which one will work best for your organization. To begin your path towards a sustainable future right now, please feel free to get in touch with Orb Energy for a no-obligation commercial solar evaluation, and to learn more about our specialized solar financing choices.
Ready to cut your energy bills and boost sustainability? Fill out the form today to discover how Orb Energy’s custom solar solutions and in-house financing can power your business forward.