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Solar distributor BayWa r.e. is proud to offer our customers commercial financing tailored to each project. We have relationships with financiers that specialize in both construction and term financing to help you close each opportunity with the right investor. These products cater to business entities of all types, including a variety of for-profit and non-profit organizations.
There are several commercial financial products available from BayWa r.e. See below for a brief guide.
Commercial Financing Products
Power Purchase Agreement
A power purchase agreement (PPA) is a long-term agreement, often 15-25 years, to purchase discounted power at a controlled cost. This is often an ideal financing solution for organizations who cannot take advantage of the Federal ITC or MACRS depreciation, such as non-profit organizations, and want immediate savings on their energy bills at predetermined electric rates. Many PPAs offer multiple purchase options throughout the agreement.
Key benefits of PPAs
No upfront cost or maintenance costs
Lock in energy pricing for up to 25 years
Several buyout options available
Off-balance sheet reporting
Organizations who typically choose PPAs typically have:
An emphasis on energy savings beginning day one
No tax appetite, especially non-profits
The desire to simply replace their electric bill with solar
Great or excellent credit
An operating lease (also known as a Tax Lease, True Lease, FMV Lease) is a medium-term agreement, typically from 7-10 years, where the lessee pays for the right to use the system without taking ownership of the asset. This is often an ideal solution for organizations who cannot take advantage of tax incentives and want the greatest long term savings. The system is owned by a third party who utilizes the tax benefits from the system and passes along savings to the host with fixed monthly payments, often claimed as operating expenses. Systems financed through tax leases offer a path to ownership at the end of the lease term at a fair market value. Often times, the investor will also offer "residual financing" which enables the lessee to spread fair market value purchase over an additional few years.
Key benefits of operating leases
No upfront costs
Fixed monthly payments lower than capital lease
Lower payments than capital leases, more savings than PPAs
Off-balance sheet reporting
Organizations who typically choose operating leases typically have:
Limited to no tax appetite
A desire to eventually own the system
A focus on long-term savings
Good through excellent credit
A capital lease (also known as Finance Lease, Buck-Out Lease, Dollar Buyout Lease) is a medium-term agreement, typically between 5-10 years, where the lessee makes monthly payments towards a substantially discounted purchase price at the end of the term. This buyout is typically one dollar, hence the expression "buck-out." In this arrangement, the lessee retains all tax benefits from the solar system, reports the system as an asset on their balance sheet, and can deduct the interest from monthly payments. This is often used when organizations have less than perfect credit or want ownership financing without a down payment
Key benefits of capital leases
No upfront costs
One dollar buyout after lease term
Organization can monetize all tax incentives
Fixed monthly payments
Organizations who typically choose capital leases typically have:
Tax appetite for the ITC and depreciation
A desire to own the system with no money down
A focus on buying the system without any balloon payments
Good to excellent credit
An organization may choose to borrow money (also known as debt financing and can include PACE) to purchase their solar system, with terms that are typically between 5-20 years. The organization receives all tax advantages of ownership, including the ITC, depreciation, and interest deductions. There are many varieties of loans available, from solar-focused lenders, or energy efficiency lenders such as PACE organizations, to the SBA and traditional banks. Loans are often secured by the property and may require a down payment, but can also provide more favorable cash flow than capital leases.
Key benefits of loans
Realize all available tax advantages
Fixed monthly payments with deductible interest
Often provide more compelling economics than capital lease
Can, at times, be used to finance a Prepaid PPA
Organizations who typically choose loans typically have:
A preference towards system ownership
The means to provide a down payment, if required
Good to excellent credit and/or equity in the property