Business or Green Loan

Borrow the cash, own the asset from day one

A business or green loan sits firmly at the ownership end of the funding decision. Rather than renting the system or wrapping its cost inside a lease, you borrow a cash sum, buy the array outright, and repay the loan on its own schedule. From the moment the installation is energised you own the asset in full, so every unit of generation, every pound of avoided grid cost and any export income belongs to your business, not to a funder. The loan and the solar are two separate things: one is a debt you service for a few years, the other is an asset that generates for twenty-five and keeps the savings free of finance strings, which can simplify matters if you later refinance or sell the site.

How it works

You agree a facility with a bank or specialist lender to cover the installed cost, sometimes with a modest deposit, over a term commonly running three to fifteen years, so you can match repayments roughly to the system's payback and to how long you expect to occupy the building. Pricing is set off a reference rate such as the base rate plus a margin reflecting your credit profile and any security. Some lenders market keener green terms for renewable projects, which can mean a slightly reduced margin or lighter fees, though this is not universal, so treat it as a question worth asking rather than a given. Because it is a general borrowing facility, it may sit alongside covenants or require security, so the small print matters as much as the headline rate.

The tax that ownership unlocks

Because you own the system, you claim the capital allowances on the full installed cost. Solar is special-rate plant, so it does not qualify for full expensing; it does qualify for the Annual Investment Allowance, giving 100 per cent first-year relief on qualifying spend up to £1m, which comfortably covers most business installs. Above that cap a company can use the 50 per cent special-rate first-year allowance, with the balance written down at 6 per cent a year. Ownership also keeps all the savings and the Smart Export Guarantee income in your hands, and the interest element of your repayments is separately deductible. VAT at 20 per cent is reclaimable if you are VAT-registered, and self-consumed rooftop solar is exempt from business rates in England to March 2035. This is general information, not advice, so confirm your position with your accountant.

The trade-offs

A loan adds debt to the balance sheet and an interest cost that a fully funded route such as a PPA avoids, and security or covenants may constrain future borrowing. Compare the total cost, including fees and interest over the term, against the modelled savings so you see the genuine net position, not just the monthly repayment, and check the early-repayment terms in case you want to clear it ahead of schedule. If protecting your borrowing capacity matters more, a PPA or an operating lease may line up better. Test the numbers first in the finance calculator and check the underlying return on the payback and ROI page.