The solar industry has been growing over the last few years. Jobs at solar companies increased 123% since November 2010. In the United States, there are about 209,000 solar workers. With the industry growing, now might be a good time to consider a solar financing program. Here’s what you need to know about them.
What is a solar financing program?
Solar financing is where residential, commercial, and industrial property owners are financed to get renewable energy installations or energy efficiency upgrades. Businesses invest in it because it can be an income-generating asset. A majority of companies will pay for the upgrade in cash because of the potential internal rate of return. A typical rate of return for most businesses is 15% or more. Some businesses will choose to use financing to get their system. They do this as a means to reduce the upfront cost of their system. The financing programs help to save on the cost of current and future electric bills.
What solar financing options are available?
There are several different social financing options available for businesses today. One of the most commonly used options is PACE financing. PACE stands for Property Assessed Clean Energy. This allows homeowners or business owners to receive a property tax lien to finance their solar systems. Payments are generally made twice a year when property taxes are paid, and up to 100% of the system cost can be financed.
Another option that can be considered is credit unions. Solar loans are offered for residential installations, and fees are generally minimal. Sometimes there are no fees at all. It’s possible interest payments will be deductible as well. FICO scores, Loan-to-Value calculations, and Debt-To-Income are factored into the qualification process.
Solar financing loans are also an option, but they usually have higher fees than PACE or Credit Union loans. The payments can eventually be lowered after getting a tax credit. If a company is unable to get tax credits and wants guaranteed insurance for the system, power purchasing agreements might be a better option. It’s important to be aware that under this payment plan a company doesn’t own the system. The system will be owned by a third party who’s responsible for making sure the performance of the system is working as advertised.
What incentives are there with solar energy?
There are two potential incentives given to businesses for using solar energy. The first is tax credits. When taxes are filed in the year a solar system is installed, a company can claim a tax credit. A tax professional will be able to advise you how much you can receive based on the rules related to system installation. A second incentive option is rebates. While there aren’t many available anymore, there’s still some left for new construction.
As the solar industry continues to grow, more opportunities are becoming available. Solar financing programs present a potential opportunity to save money and get tax benefits. Consulting with an energy company will help determine if a solar financing program is a good option for your business.