It’s no secret that the residential solar boom has been good to solar installation and development companies across the United States. Despite commercial solar projects having access to equal, if not better, incentives than their residential counterparts, the commercial solar space has yet to boom. And the small and medium commercial space, in particular, remains underdeveloped.
The Inflation Reduction Act, however, along with the ongoing growth of the solar industry driven by technology cost reductions, has paved the way for that all to change. Today, more developers and installation companies are looking into the small to medium commercial solar space to tap into this substantial and lucrative customer segment. With the addition of long-term financing into this equation, the sky’s the limit for commercial solar.
Installers can expand their businesses through commercial solar financing partnership through three steps.
Step 1: Promote solar as a cash generator
Homeowners interested in installing solar panels are often driven by monthly savings – i.e., short term cash generation. When you sit down with a business owner or CEO to discuss installing their commercial solar system, you’re probably already leading with the financial benefits. Traditionally, however, going solar in the commercial space requires a different pitch due to a lack of access to financing.
Instead, installers should promote going solar as a cash generator when meeting with commercial prospects. Nearly every commercial solar installation should be financed. With the right solar financing, businesses can install a system that:
- Preserves cash reserves by eliminating a significant down payment.
- Pays for itself year over year.
- Generates cash flow by reducing operating costs.
The business owners you talk to rarely get a chance to make an investment in their business that won’t deplete their cash. Investments typically come with tradeoffs – do A or B, but not both. And going solar has traditionally required burdensome upfront costs.
By financing 100% of the installation cost, businesses can access the utility savings of solar – a direct, immediate injection to the bottom line – without going out of pocket to pay for them up front. This allows them to not only realize the benefits of solar, but also make other investments in their company that will lead to more income.
Step 2: Help customers embrace their ESG preferences
Despite any ongoing debates, consumer preferences for environmental, social and corporate governance (ESG) initiatives do have an impact on business’ bottom lines. Solar is a great way to realize that impact and reflects how each step taken to embrace, respect and reflect your customer’s values is financially prudent as well as socially responsible.
Business customers are regularly motivated by ESG considerations, whether through external mandates from stakeholders or community members, internal motivations created by customer demands or employee preferences. You may find, however, that while businesses want to go green, they’re wary of what they assume it takes to do so.
Perhaps they’re hesitant to pursue an ESG-focused initiative they assume has narrow – even dubious – long-term benefits. Maybe they feel, even with an improving economic outlook, it’s better to reserve resources and focus on current projects rather than adopt new technology.
As experts in the solar space, installers have an opportunity to encourage and make it easy for business owners to follow the ESG path they want to take. Installers can help pave the path, too. Offering financing for a business owner’s solar system allows them to follow their values in a more explicitly financially sound way.
Step 3: Secure a partner that specializes in solar financing
Before they commit to going solar, clients are likely to have questions about interest rates, prepayment penalties, collateral and other sundry financial details. But installers are experts in solar tech – not financing.
One option, of course, is to leave customers on their own to reach out to lenders. But as outlined above, traditional small business loans aren’t specifically underwritten to reflect the realities of solar technology. Traditional loan terms, for example, may have floating rates or not account for federal incentives, making it harder for business owners to take full advantage of the revenue-generating benefits of their new solar system. Any time you send prospects to a third party that doesn’t understand solar risks you losing the sale.
Connecting business owners with a partner that specializes in solar financing will increase the chance that prospects remain in your pipeline. What’s more, these partnerships will enable you to enter every sales meeting ready to present a complete financial picture to business owners.
The right solar-focused fintech can offer businesses loans from five to 20 years with limited collateral and terms that a business owner can understand and adopt. The result: lower monthly payments, long-term revenue generation and ESG support without any outsized upfront cost.
Build a better solar-supported economy, together
To realize the full benefits of solar energy for small- and medium-sized businesses, it’s essential for installers and financers to band together and introduce solar solutions to the small- and medium-sized commercial sector. Only then will the small businesses that create so much value for our communities be able to access the benefits of solar in the same way that large corporations or individuals have accessed tax credits, energy savings and other incentives.
Our economy and our planet will be better off the more we work together. No single business installing solar panels, no individual company reaching toward its ESG targets and no lone fintech startup creating innovative financial connections can solve this nationwide issue on its own.
Duncan Hinkle is the Co-Founder & Head of Business Development of Sunstone Credit, a technology-enabled clean energy financing platform that helps businesses go solar. Duncan has worked in solar on both the development and installation of projects as well as in solar specific financing for over ten years.