How can I pay for a solar project – and which model is right for my organization?
There are several ways to finance a commercial solar system, and choosing the right one can significantly affect your return on investment, access to incentives, and long-term ownership. Melink Solar commonly sees two primary approaches: cash purchase and third-party ownership through a Power Purchase Agreement (PPA) – both of which can offer strong benefits depending on your organization’s capital availability and tax situation.
But those aren’t the only paths. Other tools like PACE financing, solar leases or loans, and Non-Profit Funding organizations (like CollectiveSun) for nonprofits offer creative ways to make solar accessible – no matter your starting point. In the sections below, we break down each financing model so you can choose the path that best aligns with your financial goals and sustainability strategy.
At-a-Glance: Solar Financing Options
| Financing Method | Who Owns the System? | Who Claims Incentives? | Upfront Cost | Maintenance Responsibility | Available To |
| Cash Purchase | You | You | High | You | For-profits, nonprofits with capital |
| PPA | Third Party | Third Party | Low | Third Party | Most orgs with large loads (>500kW) |
| Loan | You | You | Medium | You | For-profits and capital-ready orgs |
| Lease | Third Party | Third Party | Low | Usually Third Party | Most orgs |
| PACE | You | You | Low (repaid via taxes) | You | Properties in eligible jurisdictions |
| CollectiveSun | You (after Year 6) | CollectiveSun | Moderate | CollectiveSun (first 6 years) | Nonprofits, mission-aligned orgs |
Common Misconceptions About Solar Financing
“We can’t afford solar because we don’t have the cash.”
With PPAs, leases, and Non-Profit Funding Organizations (like CollectiveSun,) you can often go solar with little to no upfront capital.
“If we don’t own the system, we don’t benefit.”
Third-party ownership models still offer reduced energy costs, price stability, and sustainability scoring impact.
“A loan is always better than a lease.”
Not always. Loans offer ownership but require higher monthly payments and full responsibility for maintenance.
“Incentives don’t apply to nonprofits.”
With Direct Pay and Non-Profit specific funding organizations, nonprofits can now access equivalent financial benefits.
Financing: Cash Purchase #
A cash purchase is often the most straightforward and financially rewarding way to go solar. You pay for the system upfront, take full ownership, and directly benefit from all available incentives – like the Investment Tax Credit (ITC)and MACRS depreciation (if applicable).
You’ll also be responsible for long-term system upkeep, including annual preventative maintenance and inverter replacements. Still, this method typically yields the strongest return on investment, especially for organizations with capital reserves and a long-term facility plan.
The simplest and most cost-effective option – if capital is available and long-term ownership is part of the strategy.
Financing: Power Purchase Agreement (PPA) #
A PPA allows you to install solar with little or no upfront cost. A third-party developer owns, installs, and maintains the system on your property – and you agree to buy the electricity it produces at a negotiated rate, typically lower than utility rates.
Key features of a PPA:
- Third-party claims the tax incentives
- You benefit from predictable and potentially lower electricity costs
- No ownership obligations or maintenance responsibilities
- Custom structures like prepaid PPAs or partial buy-downs may further improve long-term savings
- System size matters: PPAs are most viable for larger systems (typically 500 kW and up)
Over time, as utility rates rise, your PPA pricing can deliver more savings – even if the initial energy rate is similar to utility costs.
Financing: Lease or Loan #
Both options allow you to finance a solar project without a large upfront investment, but the details differ:
- Loan: You own the system, claim the incentives, and repay the cost over time (typically 5–15 years). You’re also responsible for system performance and maintenance.
- Lease: A third party owns the system and typically handles maintenance. You pay a fixed or escalating rate over a long-term contract (often 20–30 years), usually tied to the system’s performance.
With loans, you trade higher monthly payments for greater long-term value. With leases, you prioritize low upfront costs and simplicity.
Financing: PACE Financing #
PACE (Property Assessed Clean Energy) allows commercial property owners to finance solar – and other energy-related improvements – through a special property tax assessment. This structure eliminates the need for personal or business loan guarantees and is designed to align financing terms with the lifespan of the system.
Benefits of PACE:
- 100% financing with no money down
- Repayment over up to 30 years via your property tax bill
- Applicable to both new construction and retrofits
- Can also cover improvements like HVAC, roofing, and lighting upgrades
Availability is state- and municipality-dependent. Melink Solar can help determine whether PACE is active in your area.
Financing: Non-Profit Funding Organizations #
Nonprofits and tax-exempt organizations traditionally couldn’t monetize solar tax incentives. For instance, one funding organization – CollectiveSun – solves this by acting as a financing intermediary – passing on those tax benefits to you through a discounted prepaid solar agreement.
How it works:
- You receive a 12% discount on the system’s cost
- You retain any other incentives (e.g., utility rebates or SRECs)
- CollectiveSun owns and maintains the system for 6 years, including performance guarantees
- After Year 6, ownership transfers to your organization at no additional cost
- You benefit from the energy generated from day one
- The remaining 88% of the project cost can be funded through a mix of cash, donations, low-interest loans, or crowdlending
Ideal for schools, churches, community groups, and mission-driven nonprofits ready to go solar – but previously blocked by tax barriers.
Need help choosing the best option for your situation?
Melink Solar can model each scenario to help you choose the most strategic financial path for your solar investment.
Curious how financing affects long-term cost of energy? Continue to Section 4.4: Levelized Cost of Energy (LCOE) to see how each model compares over time.
Need more context on the Direct Pay incentive mentioned? Refer back to Section 4.2: What Solar Incentives Are Available, and How Do They Work?