Solar and Storage - What are the Options for Financing?

Massachusetts is among the “Top 10 Solar States”, ranking 7th for cumulative solar capacity installed according to Solar Energy Industries Association (SEIA). With 86,261 installations,

9.8 percent of our state’s electricity comes from solar and more than 384,000 homes are powered by solar (SEIA, Q3 2018).

Solar and storage markets are expected to grow significantly, with the new Solar Massachusetts Renewable Target (SMART) tariff program potentially a driving force.  We expect to see an increasing number of developers, manufacturers and investors (from owner occupied real estate to Behind the Meter, or BTM) seeking to finance projects.                       

Options for Financing

Conventional bank debt financing is likely available for owners as well as the companies that build, supply and install solar systems. In addition, complimentary financing may be available through the Small Business Administration (SBA) or other local and state agencies and firms. A good local banker will be able to guide a potential borrower through the financing process.

Understanding future cash flow generation is critical in assessing how much debt a project can handle comfortably. Banks typically like to see a ratio of at least 1.2x of free annual cash flow to annual debt service (total principal and interest payments on all loans). Projections of both income and expenses for 10-15 years (as solar is a long-term agreement) should be thorough and well researched (SMART program including adders such as building and canopy mounted battery energy storage systems and BTM revenue). Also critical is the initial estimate of project cost, supported by firm quotes, estimates and research.

Reasons for Getting Delayed or Denied

It’s important for all projects to be financed with a proper balance of debt and equity. A viable source of equity should be identified prior to seeking debt financing. The firmness of the projected income stream is also important. The more speculative the income stream, the less likely the financing viability. A history or track record of similar projects is important, but not always necessary.

Whether attempting to obtain financing for solar or storage, the fundamentals of credit analysis remain the same, with assessment of all cash inflows and outflows including initial investment. To the extent that storage helps to fortify cash flow, it certainly may benefit the viability of the project.


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