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The trend of solar energy continues to surge thanks to technological innovations and increased project accessibility. In the United States, 40% of new electric generating capacity came from solar energy projects.
A common goal for solar energy projects is to install solar equipment, such as solar panels, to improve sustainability and energy costs. Typically, this equipment is installed for residential or commercial property use.
What if your property is not suitable for the installation of solar equipment? Instead of forgoing your project, there are alternative options available. One option to consider is community solar.
Not only can community solar make previously inaccessible equipment available, but it can also decrease your business’ energy costs in the long run. Before getting started, however, you must determine the best method for financing community solar projects.
Keep reading to learn about several methods you can use when financing community solar.
One finance structure offered by AVANA Capital to consider when financing community solar is a construction loan. This finance solution is designed to support business growth and aids in preserving wealth.
The unique structure of AVANA Capital’s construction loan is beneficial when financing community solar. During the first two years of the loan, a client will only pay the loan’s interest. This initial interest-only payment structure allows your business to have more cash-on-hand during construction.
The Keystone Power Holdings case study illustrates the flexibility that AVANA Capital can provide with construction loan financing. In this scenario, AVANA Capital originated a short-term equipment loan that later rolled into a full construction loan. This financing structure was beneficial due to the time-sensitive nature of Keystone’s renewable energy project. As a result, Keystone was able to purchase the necessary solar equipment and build the project with the funds provided by AVANA Capital.
Another method to consider is a Power Purchase Agreement or PPA. A PPA can be a cost-effective method when financing community solar because it does not require the purchase of a PV system. So, this structure can be appealing to borrowers who want to use solar energy but can’t host the equipment on-site.
In a PPA, the project developer owns, maintains and operates the PV system while the host customer is responsible for siting the equipment. Once the system is installed, the host customer will then purchase the energy generated by the system from the solar services provider.
The sale-leaseback structure offers companies an opportunity to raise capital for a community solar project.
First, a company that owns an asset, such as solar panels, will sell that asset. After the sale of the renewable energy asset, the new owner leases it back to the previous owner. The duration of a sale-leaseback is typically agreed upon in the lease terms.
One benefit that can be gained with a sale-leaseback is the quick generation of capital without losing access. A business can gain the capital it needs without losing the energy generated by its solar equipment. Additionally, a business can avoid the risks that come with owning renewable equipment while still using that equipment. Some sale-leaseback structures also allow the initial owner to buy the asset back once the lease has ended.
To find the best financing option for your community solar project, you must understand your needs. Does your project require funding for construction or installation? Or, are you looking to fund the purchase of necessary project equipment?
Once you have a better understanding of your project, you can narrow down your financing options. For example, your project may require equipment, so an ideal finance option would be a loan made for purchasing equipment.
By partnering with AVANA Capital, finding appropriate financing for your project is much easier. The team at AVANA Capital begins by learning more about your project and your goals. With this information in mind, AVANA Capital creates custom-tailored financing solutions that meet your needs.
Additionally, AVANA Capital guides clients through the financing process to ensure they understand each aspect of their loan. In the end, clients are able to achieve their sustainability goals thanks to the client-focused approach that AVANA Capital utilizes.
Are you looking for a community solar financing solution?
Partner with AVANA Capital and receive a custom-tailored finance structure that meets your project needs.