Energy Finance

What Do Financiers Consider When Qualifying Commercial Solar Projects?

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Not sure if you qualify for financing for your solar project? In this article, we go over what financiers look at when a business applies for financing. Here are some important factors financiers consider when evaluating commercial solar projects.

Offtaker Credit

When evaluating financing, the first thing lenders consider is the offtaker’s credit. With terms often extending up to 15-25 years, lenders want assurance that the business will still be in good financial standing throughout the term

For large corporations and public entities that are considered investment grade, credit is known to be strong and financing is significantly easier to secure and on better terms. 

However, most small and medium-sized businesses and non-profits are not considered investment grade, making financing options more sparse and expensive, leaving these entities often underserved. 

Some of the factors that determine the credit of a business are the history of the business, current debt obligations, debt payment history, and the level and stability of profitability over time.

Debt Service Coverage Ratio (DSCR)

Another factor lenders take a look at is the Debt Service Coverage Ratio, or DSCR. The DSCR refers to how much cash flow is available to service the debt payments in the given quarter or year

A DSCR of 1 means that all available cash flow is being used to make debt payments, which severely stifles the business’s ability to grow. This is very risky for the lender. The lowest DSCR lenders typically consider is 1.2 and to be on the safe side, lenders often prefer a DSCR of 1.4 or greater.

Project Economics

Intuitively, it is very risky for lenders when the solar project results in the business losing money. The more savings from solar, the more the business will be able to repay the loan. There are many factors that dictate these savings such as the current utility rate, installation cost, system quality, available incentives, and net energy metering policies.

Type of Business

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The type of business impacts the risk profile of financing a solar project. Some industries are riskier and less stable than others. For instance, hospitality properties (hotels and motels) are considered riskier since leases are not involved and performance is highly correlated with the business cycle. 

In addition, financiers are often reluctant or unwilling to provide financing to gas stations because they face significant environmental risks relative to other types of businesses.

Financiers are also reluctant to lend to non-profits. Non-profits by their very nature may have less capacity to repay the financing and tend to have worse financial metrics such as the DSCR. 

Not only that, but lenders face greater headline risk or negative news coverage in the event that the non-profit defaults on the loan.

Take for example a secured loan on a local church where the property serves as collateral. If the church defaults and the lender moves to recover its losses by repossessing the property, there may be a backlash in the local community and negative press that may reduce the lender’s future revenue.

Luckily, BlueFlame is much more flexible than traditional finance companies. In fact, we offer financing to a wide range of commercial customers including hotels, gas stations, and non-profits. If you are interested in speaking with us about solar financing, please schedule a free appointment here.


What Kind Of Financing Options Are Available For Solar Projects?

There are many different financing options available for solar financing. We will go over all the possible options and along with the many benefits that comes with them.

How Can BlueFlame Help You Finance A Solar Project Today?

Finance Your Solar Projects Today!

Is your business thinking about installing solar panels but afraid of the cost? Are you worried about the expensive maintenance cost after installation? These are just some of the common fears when it comes to going solar that prevents businesses from experiencing the many benefits of solar energy. The common misunderstanding about solar panels being too expensive to even consider installing is unfortunate, since there are many financing options available to help businesses afford going solar.

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What Are The Different Financing Options For Solar Projects?

Still on the fence about going solar? There are different finance options that can help you afford a solar system and reap the benefits that come with them. If a cash purchase is not possible at this moment, you can try these financing options:

  • Loan

    • You own the system and keep all the solar tax incentives and rebates.

  • Operating Lease

    • Great option for those who cannot take advantage of the tax incentives, since highly qualified 3rd parties monetize the tax benefits and pass the savings on to you through lower lease payments.

    • You can own the system at a very low price (almost free) at the end of the term.

    • Little or no upfront costs.

    • Fixed monthly payments.

  • Power Purchase Agreement (PPA)

    • Similar to operating lease,  a PPA monetizes the tax incentives and passes this on to you through lower electricity rates.

    • No upfront costs.

    • You can buy the system at the end of the term.

BlueFlame Energy Finance is a specialty B2B energy finance company offering flexible, low friction & non-recourse financing solutions tailored to the specific needs of our customers. We are committed to making renewable energy, energy efficiency & water improvements accessible and affordable to a wide range of customers nationwide. Our financing is a smart alternative to traditional financing. Our experienced team works tirelessly to bring flexible financing terms and structures tailored to our customer’s specific needs. Learn more about our financing solutions here.



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