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How to Finance Commercial Solar: Loans, Leases, PPAs, and C-PACE Explained
9 min read
For most businesses, the decision to go solar isn't really a question of whether it makes financial sense — it usually does. The real question is how to structure the investment.
Commercial solar financing comes in four main forms: loans, leases, power purchase agreements (PPAs), and C-PACE. Each one changes who owns the system, who captures the tax benefits, and what your cash flow looks like over time.
Choosing the wrong structure doesn't make solar a bad investment — but it can leave money on the table, or create constraints you didn't anticipate. This guide breaks down each option so you can have a more informed conversation with your accountant, lender, and installer.
Talk to a Lunex commercial specialist about your project »
The Core Trade-Off in Commercial Solar Financing
Before getting into the options, it helps to understand the fundamental tension at play.
When a business owns the solar system — whether purchased outright or financed with a loan — it captures the full financial upside: tax depreciation, potential incentives, and all of the long-term energy savings. Ownership requires capital or credit, and it puts maintenance responsibility on the business.
When a third party owns the system — through a lease or PPA — the business pays for the energy output rather than the equipment. The third-party owner captures the tax benefits instead. The trade-off is lower upfront exposure and zero maintenance in exchange for a smaller share of the long-term savings.
C-PACE is a different animal entirely: it's an ownership structure with 100% financing attached to the property rather than the business's balance sheet.
Every financing decision comes back to this trade-off between capital exposure and total return.
Option 1: Cash Purchase
A cash purchase is the simplest structure: you pay the full installation cost upfront and own the system outright from day one.
Why it works
- Highest long-term return — no interest, no monthly payments, all savings flow directly to the business
- Full ownership of any applicable tax benefits and depreciation
- No contract obligations, no third-party system owner on your property
- Cleanest exit — system is an asset on the books with no encumbrances
The tradeoff
It requires significant upfront capital. For commercial systems, which commonly run from $150,000 to well over $1 million depending on scale, that's a meaningful liquidity decision. Businesses need to weigh the return on that capital against other uses.
Best fit for: Businesses with available capital, strong tax appetite, and a long-term ownership horizon on the property.
Option 2: Commercial Solar Loan
A solar loan lets you own the system while spreading the capital cost over time. Most commercial solar loans run 7–20 years depending on project size and lender.
Why it works
- Full system ownership from day one — you capture all tax and depreciation benefits
- Preserves cash for other business uses
- Loan is often secured against the solar system or property rather than business assets
- Once the loan is paid off, energy production is effectively free
The tradeoff
Interest costs reduce total return compared to a cash purchase. Current commercial solar loan rates generally run in the 4.5–9% range depending on credit profile, project size, and lender. Some solar loans include dealer fees that inflate the financed amount — always ask for the total financed amount and effective APR, not just the monthly payment.
Best fit for: Businesses that want the financial benefits of ownership without the full upfront capital outlay.
Option 3: Solar Lease
A solar lease is similar to leasing equipment — a third-party company installs and owns the system on your property, and you pay a fixed monthly fee to use the energy it produces.
Why it works
- No upfront cost
- Predictable fixed monthly payment regardless of system output
- Maintenance and monitoring are handled by the system owner
- Immediate reduction in energy costs from day one
The tradeoff
You don't own the system, so you don't capture the tax depreciation. The leasing company claims those benefits, though they're typically reflected in the rate you're offered. Lease agreements usually run 15–25 years and may include annual escalation clauses — typically 1–3% per year — so review the full contract carefully. Buyout options exist but vary widely by agreement.
Best fit for: Businesses that want predictable energy cost reduction with no capital outlay and no maintenance responsibility.
Option 4: Power Purchase Agreement (PPA)
A PPA is structurally similar to a lease, but instead of a fixed monthly payment, you pay per kilowatt-hour for the electricity the system generates — typically at a rate 10–30% below what your utility charges.
Why it works
- No upfront cost
- You only pay for what the system produces — production risk stays with the system owner
- Rate is locked in and predictable, hedging against future utility rate increases
- Maintenance and performance monitoring are handled by the developer
The tradeoff
Like a lease, you don't own the system and don't capture the tax benefits directly. Contract terms run 15–25 years, and many agreements include annual rate escalators. Some PPAs complicate property sale or lease negotiations — a prospective buyer or tenant inherits the agreement — so this is worth factoring in if you anticipate selling or refinancing the property.
Best fit for: Businesses that want immediate savings with no capital outlay, and are comfortable with a long-term energy contract.
Option 5: C-PACE Financing
C-PACE (Commercial Property Assessed Clean Energy) is a financing structure unique to energy improvements. Instead of a traditional loan through a bank, the financing is attached to the property itself and repaid through a special assessment on your property tax bill over 20–30 years.
Why it works
- 100% financing with no money down
- No personal guarantee — the obligation is tied to the property, not the business owner or company
- You own the system and retain all applicable tax and depreciation benefits
- The assessment can transfer to a new owner when the property sells (subject to buyer and lender agreement)
The tradeoff
Interest rates for C-PACE currently run around 6–8% for commercial projects. The repayment is structured as a property tax obligation, which means it takes priority over a first mortgage — some lenders will require consent before a C-PACE assessment can be placed. Not all lenders are familiar with or comfortable with C-PACE, so it's worth clarifying with your mortgage holder before pursuing it.
State availability note: C-PACE is available in most states, including Florida, Massachusetts, Colorado, North Carolina, Rhode Island, and Connecticut. South Carolina does not currently have an active C-PACE program. Even in states where it exists, availability can vary by county — confirm with your installer or local government before counting on it.
Best fit for: Property owners who want full ownership benefits with no upfront capital and don't want the obligation on their business's balance sheet.
Side-by-Side Comparison
| Cash | Loan | Lease | PPA | C-PACE | |
|---|---|---|---|---|---|
| Upfront cost | Full | None | None | None | None |
| System ownership | You | You | Third party | Third party | You |
| Tax/depreciation benefits | You | You | Third party | Third party | You |
| Maintenance responsibility | You | You | Third party | Third party | You |
| Long-term savings potential | Highest | High | Moderate | Moderate | High |
| Balance sheet impact | Capital asset | Debt | Off-balance (operating lease) | Off-balance | Property tax lien |
| Best for | Cash-rich, long-term holders | Owners wanting full benefits | Zero-capex, hands-off | Zero-capex, hands-off | Property owners, no personal guarantee |
The Tax Side: What Businesses Should Know
A few things worth keeping in mind as you evaluate structures:
MACRS depreciation allows businesses that own their system to depreciate the asset over five years, which can significantly reduce the net cost of a cash purchase or loan in the early years. This applies to C-PACE as well since the business retains ownership.
Bonus depreciation — currently at 100% for qualifying energy property — means many commercial solar owners can deduct the full remaining basis in year one, creating a substantial tax shield alongside any other applicable credits.
Leases and PPAs pass tax benefits to the system owner. That doesn't mean the structure is worse — the leasing company typically factors those benefits into a more competitive rate — but it means you're not capturing them directly. Whether that matters depends on your business's tax position.
Tax rules are complex and change. Run the numbers with your accountant before choosing a structure — the right answer varies by business, not just by option.
Which Structure Is Right for Your Business?
A few questions that tend to clarify the decision:
Do you have strong tax liability? Ownership structures (cash, loan, C-PACE) let you capture depreciation benefits. If your business has consistent taxable income, ownership typically yields the highest return.
Is capital availability the main constraint? Loans, leases, PPAs, and C-PACE all get you to $0 upfront — but the total cost and return over time vary significantly. If you're choosing between zero-down options, run a 20-year projection on each.
How long do you plan to hold the property? Long-term holders benefit most from ownership. If you're planning to sell in 5–7 years, a PPA or lease with clean buyout terms, or a shorter-term loan, may be more practical.
Is EV charging or battery storage part of the plan? These additions affect project size, cost structure, and in some cases financing eligibility. It's worth scoping them together rather than treating them as separate projects.
Next Step: Get a Commercial Site Evaluation
The right financing structure depends on the right project design. Before you can model the numbers accurately, you need to know what the system looks like — size, layout, equipment, and estimated production.
Lunex provides free commercial site evaluations that give you a real basis for financial modeling, not a generic estimate.