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Commercial Solar Panels: Finance or Buy?

December 21, 2018  // Sun Capture

The use of solar energy for business is on the rise in the Kingdom. With Vision 2030 on the horizon, the Saudi government is incentivizing businesses to get a head start on what will be the future of energy production in the Kingdom.

Solar energy isn’t new — many other countries have been gradually incorporating it into their energy infrastructures for years. But solar is, in many ways, still in its infancy in Saudi Arabia.

Many businesses have already taken advantage and many more are looking to make the leap — including commercial property developers. Adding solar energy to commercial spaces will save developers significant money over the long haul, but there remains confusion about how financing for commercial solar panels works, and what the options are for those who want to implement them. The answer is actually pretty simple. It all comes down to a decision between purchasing commercial solar panels outright or financing them.

Finance or Purchase: What’s the Best Approach?

The decision to finance versus purchase commercial solar panels comes down to one thing — economics. It all depends on the financial variables for each individual project. Buying solar panels for commercial properties is pretty much the same as deciding how to purchase or finance commercial buildings themselves. Like commercial buildings, developers must decide how to allocate existing funds.

Here are 3 factors commercial developers should consider in this decision:

Availability of Cash

First and foremost, cash on hand is the biggest factor in whether a developer can or should finance instead of paying up front. By paying for commercial solar panels (or buildings, for that matter) up front, property developers will avoid finance charges going forward, and will get return on their investment sooner than they would with financing. Of course, simply having enough cash on hand to purchase panels doesn’t mean it’s the best use of that cash. You also need to consider…

Cash Flow and Opportunity Cost

When deciding whether to purchase or finance commercial solar panels, cash flow as it relates to opportunity cost is arguably the biggest factor. Cash on hand is great to have, but making the right decisions about what to do with that cash is crucial. In some cases, purchasing solar panels with cash is the right move. Developers will immediately see their power costs decrease and recoup their investment sooner. However, in some cases, financing is a better option despite having the cash to buy. Financing commercial solar panels allows developers to use their cash on hand for other investments — like investing in their business. In many cases, this decision is based on…

Size of the Project

For smaller commercial properties, spending cash to purchase solar panels is usually the best course of action — assuming the cash is available. With smaller buildings, adding efficiencies like solar that save money from day one can help make the project financially successful. For larger projects — bigger buildings, multiple properties — developers may be better off financing the commercial solar panels, as they can use their cash on hand to develop more properties while still realizing the benefits or significantly reduced power costs.

A Low Risk Investment

Whether you finance or outright purchase commercial solar panels, the investment is a safe one. Solar power is not a bet. It’s an established way to save money on power costs, and there is an endless supply of sun to keep the power humming. Aside from some minor maintenance and upkeep, you will see your investment pay off sooner than later with solar.

Sun Capture is a solar energy services company in Saudi Arabia helping businesses in the GCC bridge the gap between the current rising energy demands and costs, and the coming national move towards affordable renewable energy. To learn more about how solar can help your energy needs and bring your business in line with Saudi Vision 2030, contact us today.