Small to medium enterprises (SMEs) have their own challenges and opportunities when it comes to commercial solar financing agreements.
Fortunately they can leverage incentives and clauses that offsets much of their operating costs when sending kilowatts back to the public grid.
While that will be a great benefit for their energy consumption, there are short-term and long-term cost considerations that will speak to the financing of the project.
Let us examine what local organisations can consider for the investment.
Dealing With a Trustworthy Provider
Poor commercial solar financing options are always the result of dealing with an untrustworthy provider. This is an indication that the business does not have the client’s best interests at heart, and it is an issue that can be alleviated with some research and foresight. A mandatory strategy that all SMEs must adopt is referencing and researching the credentials of the provider, checking their customer service quality, installation expertise, pricing schemes and client policies.
Those organisations who do not suffer from bad credit are well positioned to jump on an official green loan. So long as the provider is accredited by the Clean Energy Council, this is a loan that should be sourced at a much lower rate than what banks or financers would usually provide for general constituents.
Power Purchase Agreement (PPA)
There will be some businesses who fall into the SME category that use a healthy amount of energy on a daily basis. If this is the case, then they could be best suited to a power purchase agreement (PPA) for their commercial solar financing. No upfront costs are included in the project, but the client will be paying cents on the dollar for the energy that is generated. Should this level meet a medium to high threshold for the business, then this will be a sustainable option.
The rental option is one domain involved with commercial solar financing that is not usually recommended for households and average citizens. Although it will alleviate significant upfront costs, it ties the family to the premises as they will need to pay the entire investment in the event they leave location. Yet this is a good choice for SMEs who have signed onto a medium to long-term lease agreement.
There are few SMEs who are liquid enough to provide upfront cash for a one and done investment with their commercial solar financing. A vast majority of organisations are operating under debts, loans, long-term agreements and their viability is a year-to-year, month-to-month or even a week-to-week proposition. However, for those enterprises lucky enough to be flush with cash following a sale or investment, then an outright sale would be recommended. It will bypass the need to worry about interest rate fluctuation, ownership logistics and dealing with third parties. It is an opportunity to add tangible property to the premises if that is an ambition of the brand.
Small-Scale Technology Certificate (STC)
A strategy that can be utilised by SMEs with their commercial solar financing is to engage a small-scale technology certificate (SSTC). This is an official agreement that will be on the table for organisations who are operating under a model below 100 kilowatts of energy. Those enterprises above the 100-kilowatt threshold have the opportunity to source a large-scale technology certificate (LGC), but the same principle applies for companies at a modest level. The STC will only have a lifespan for another decade once it is officially phased out by 2030, but it is a great chance to save key capital costs.
One option that suits one type of SME for commercial solar financing won’t necessarily suit another. Every business is unique when it comes to their energy usage requirements, their lease agreement and their capacity to make the switch without burdening their balance sheet. The good news about securing this type of modern infrastructure is that the technology is self-sustainable, efficient and gives brands an opportunity to market themselves as eco-friendly. All options should be surveyed before a final call is ultimately made by the owner or manager.