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It's a widespread misperception that a commercial solar system has a high initial investment. For an appealing solar project, the loan payments will be less than the energy savings, allowing businesses to start with a positive cash flow result and no out-of-pocket expenses.
It's important to emphasize that none of this should be interpreted as financial advice; rather, it serves as an overview of the many financing possibilities for commercial solar power. Before making a choice, please speak with your accountant or tax counselor.
Purchasing a Solar System with Cash
Businesses typically have a limited amount of operating capital and a lot of initiatives to support. Even when investing in a solar project is the most financially advantageous, producing energy is frequently not thought of as a primary business activity. Paying for solar upfront will typically result in the highest overall return.
Millions have been committed by the Clean Energy Finance Corporation to assist Australia's major banks in providing subsidized "energy-efficiency" loans. These loans are offered by Australia's major banks and typically provide a 0.70% headline rate discount for investments in clean energy assets. It is advised to request a quote from a bank that provides CEFC-funded energy-efficiency loans so that you may contrast it with other available business funding choices.
An organization can take advantage of lower electricity costs through power purchase agreements (PPAs) without needing to own a system. Instead, a PPA provider purchases and owns the solar system, selling the energy it generates directly to the company at a pre-determined price that is less expensive than electricity from the grid.
For PPA contract terms, there are currently no industry standards or particular laws in the solar business, so it is advised to seek counsel before making a purchase to guarantee you are receiving a good bargain.
Operating leases are made to offer a fixed monthly payment, much like an energy-efficiency loan, but they also give the business the option to deduct payments. According to this article from compliance quarter, these leases will be handled as a "on balance sheet" loan following the implementation of new accounting standards (AASB 16).
In order to determine if the loan repayments are tax deductible for your company, we advise seeking account counsel.
The ideal choice for financing a solar PV system, however, actually depends on the needs and objectives of the organization in question. In order to provide a commercial solar loans comparison, Solar system providers can separately model the effects of the various financing choices using consistent assumptions.
We urge you to contact us using the details provided below to discuss your needs in greater depth and to receive a free business case analysis and indicative price comparison.