And I’m Warren, and please be sure to subscribe and like this video to be notified when we release future videos just like this. – So Warren, solar is a significant investment with a great return. – Yes.
So how should a business pay for a solar investments? – Yeah, well, the first way and the most easiest way is to use cash, but there are some things to consider before you dial out your cash. Number one, do you have cash? And number two, what else could you do with that cash that might have a better return than investing in solar? – Yeah, so the reality, if you have cash, great, there is also the conventional loan where you could borrow and depending on your interest rate, and your return on investment, it may make a lot of sense to borrow that money because you can take your savings, your electric bill that you would have owed to the utility, and you can use that now to pay off your loan.
Correct, and if you’re a business, you’re gonna be essentially eliminating, or dramatically reducing an expense to pay off the debt service that you have on that loan. – Yeah, so you can pay with cash, you can get a conventional loan.
Another option is a lease, there’s two types of leases. One is a capital lease and the other is an operating lease. – Absolutely, and those are primarily for businesses, the capital and operating leases, and we suggest that you seek the advice on your accountant for what makes more sense for you and your business.
Yeah, the capital lease is where you actually own it’s, you can almost consider a traditional loan. – Correct. – Couched in the form of a lease, or an operating lease is you actually do not hold title to, you do not actually own the equipment, but at the end of the lease term, you do get the title.
You do own the system. – And typically the distinction there is that with the capital leases, you get the benefits that come with owning the tax credits, etc. With the operating leases, you do not. So, in most environments, capital leases make more sense for businesses and operating leases make more sense for nonprofit entities.
Yeah, and then another way that you can invest in solar and pay for that investment is through a PPA. And a PPA stands for Power Purchase Agreement. And what that is is a third party will actually own and operate and maintain the system.
So let’s say you have a nonprofit and they do not want to get a traditional loan, or they do not have the cash. They can get solar through a Power Purchase Agreement where someone will buy the solar, maybe an investor, someone close to the entity.
They will sell the power to that nonprofit or to that end user, and in that way they can still benefit from solar. – Sure, and PPAs aren’t necessarily just for nonprofits, they work well for nonprofits, but for profit businesses can explore PPAs as well if they don’t wanna the capital necessary to install solar.
But the person who would get the incentives would be the owner of the system, not necessarily the ones who take it. – Correct, a business that would sign up for a PPA would see a reduction in their kilowatt hour costs or their cost of energy, but they would not take advantage of any of the incentives that come along with it.
So in summary, there’s really four great ways to pay for solar, either with cash if you have that available, taken out a conventional loan, taking out a lease either a capital operating lease depending on your situation or a power purchase agreement.
Thanks for watching, if you enjoyed this information, be sure to like this video and subscribe to our channel for future releases.