Financing Your Solar System: The Best Solar Financing Companies in South Africa

Installing a solar PV system can help South African homeowners and businesses reduce their reliance on Eskom and save substantially on electricity costs over the long term. But the upfront cost of purchasing a solar system can be daunting. Financing through solar loans or other options can make going solar more affordable. This article explores the pros and cons of different solar financing mechanisms and provides an overview of leading financing companies offering solar funding solutions across South Africa.

Benefits of Solar Financing

The major advantages of financing a solar PV system rather than buying outright in cash include:

Requires little or no money down – Solar loans often need zero or minimal deposit. Leases/PPAs have no upfront costs. This preserves capital.

Immediate savings – You benefit from lower electricity bills as soon as the system activates, while repaying over time.

Pay for performance – Financing repayments come from energy savings generated by the solar system itself.

Tax benefits – Can deduct interest and depreciation to lower taxable income.

No maintenance costs – With solar leases and PPAs, maintenance is the responsibility of the solar provider.

Hedging electricity prices – Solar financing locks in rates for the loan term, avoiding utility rate hikes.

Improved cash flow – Not tying up large capital reserves to buy a system outright can help businesses manage cash flow.

While financing comes with interest charges, it can facilitate quicker adoption of solar energy solutions for many households and organizations.

Popular Solar Financing Options

There are several options for financing solar power systems:

Solar Loans

Banks, credit unions, and specialized solar lenders offer loan products specifically designed for solar panel system installations. Typical terms for solar loans include:

Amounts from R50,000 up to R500,000

Interest rates between 8-12%

Loan terms of 5-15 years

Approval contingent on a good credit score

Early repayment of solar loans avoids additional interest charges and can greatly accelerate the payback period.

Solar Leases/Rentals

With a solar lease or rental agreement, you pay a fixed monthly lease payment to a solar financing company that installs and owns the equipment on your property. You benefit from reduced electricity costs without purchasing the system. However, the leasing company receives applicable tax credits and incentives. Key aspects are:

• Little to no money down, allowing instant access to solar.
• Fixed monthly payments, often with an annual escalator of 2-4%
• Typical lease terms of 15-25 years
• No equipment ownership or responsibilities
• Power Purchase Agreements (PPAs)

In a PPA arrangement, a solar financier installs a solar electric system on your property at their cost. You agree to purchase 100% of the system’s electric output at a fixed rate for the life of the contract, typically 10-25 years. The rate is lower than what you presently pay your utility.

Solar Bonds

Some companies offer bonds anyone can purchase to help finance their solar projects. In return, bond purchasers (the investors) receive interest on their investment. This raises capital for solar expansions.

Evaluate Financing vs. Buying Outright

When deciding how to fund your solar PV system, compare:

• Total financed cost over loan term vs. paying cash.
• Projected energy savings vs. financing costs
  
• Impact on cash reserves and capital budget
• Tax incentives and credits you may miss out on

Model the numbers to determine the optimal solar funding approach for your situation.

Top Solar Financing Firms in South Africa

There is a growing number of dedicated solar finance companies serving the South African market. Here are several top financing providers:

Absa Solar Finance

Absa, one of South Africa’s “big four” leading banks, offers specialized solar finance products including lending for both residential and commercial solar installations. Absa provides both loans and equipment leasing options for solar customers.

Nedbank Solar Finance

Major financial services provider Nedbank offers a “Green Energy Loan” product specifically tailored for financing renewable energy and energy efficiency solutions including home solar power systems. Nedbank also finances larger commercial solar projects.

Standard Bank Solar Finance

Standard Bank is another one of South Africa’s big four major retail banks providing solar financing solutions. Their Environmental Finance offerings include asset financing, capital loans, and refinancing options for both small and utility-scale solar projects.

Bayport Solar Finance

Bayport Financial Services, focused on the financing needs of underserved communities, offers individualized solar solutions including solar equipment finance, solar asset finance, and operating lease finance programs to help consumers affordably access solar power systems.

Hollard Solar Finance

The Hollard Insurance Company offers an innovative loan + insurance bundled product called Hollard SunProtect, which combines solar financing with system performance insurance to fully protect consumers investing in solar solutions.

EEP Solar Finance

The Enterprise Empowerment Fund (EEP) provides various debt finance facilities to support solar installations. This includes working capital loans, term loans, and leases for small businesses looking to adopt solar power solutions.

GreenCape Finance Desk

GreenCape, a non-profit that supports green businesses in South Africa, offers a Finance Desk program that assists consumers in accessing financing options for renewable energy projects including solar PV.

Solar advisor companies like Sun Exchange and 1Sun Solar Finance also offer guidance in navigating the best solar financing options for your needs and provide direct access to apply for solar financing through their platforms. They simplify the financing process.

What To Look for in a Solar Financier

When selecting a solar loan or leasing provider, key factors to consider are:

• Interest rates and Required Credit Scores – Lower rates and flexible credit requirements increase affordability.

• Loan Term Length – Finance lengths between 5-15 years balance flexibility and cost.

• Available Loan Amount – Loan size or available credit line should sufficiently cover your solar power system costs.

• Application Process – Many lenders offer quick online applications and fast approval timelines.

• Customer Support – Look for available support pre- and post-financing to answer all questions.

• Additional Fees – Watch for hidden fees like origination charges added to financing costs.

• Experience Financing Solar – Prefer lenders well-versed in the unique nature and benefits of solar assets.

• Reputation – Finance companies having a strong track record and positive customer reviews instill confidence.

Finding the best solar financing often involves comparing multiple lenders to identify the optimal blend of low rates, reasonable terms, and helpful customer service.

Go Solar with the Right Financing Partner

Solar financing can provide South African homeowners and businesses a great pathway for funding solar PV systems with little or no money down while immediately benefiting from lower electricity costs. Choosing the right financing company is key to a smooth solar transition. Be sure to model the numbers comparing different financing options and terms to identify the best solar funding solution for your needs. Investing in solar delivers years of free electricity cost savings and helps secure a clean energy future.

Getting the Best Solar Financing Rate in South Africa

While many financiers offer solar loans and leases in South Africa, interest rates and terms can vary significantly. Follow these tips to help secure the lowest solar financing rates:

Compare Rates from Multiple Lenders

Applying with several lenders ensures you can select the most competitive financing offer. Online comparison tools like Rooftop Solar Marketplace let you compare quotes from their panel of financing partners side-by-side. Individual lender websites also allow you to complete quick prequalification checks generating initial rate quotes.

Good credit often qualifies borrowers for rates as low as 8-9%. Compare options including banks, credit unions, specialized solar lenders, and non-bank financial institutions. Their rates and lending criteria differ.

Negotiate Your Rate

Once you receive financing offers, negotiate with lenders to request a lower interest rate. Many lenders have some wiggle room to drop rates further if you push, especially if a competitor offers you a better deal. Highlight your strong credit history when advocating for a lower rate.

If the lender won’t outright reduce the base rate, inquire about buy-down options where you pay points upfront to buy the rate down. Each point typically drops rates by 0.25%. If investing $2,000 upfront to buy your rate down from 10% to 8% over a 12-year loan saves you $8,000 in interest, that is smart.

Check for Special Offers and Promotions

Timing your solar loan around special rate promotions can mean extra savings. Monitor lender websites for seasonal sales, limited-time rate drops, or referral bonuses.

For example, several times per year lenders offer rate deals like “0.99% APR for the first 12 months.” This reduces costs when you pay off more upfront during the intro period before standard rates apply. Lenders also periodically debut new solar financing products with promotional rates to attract early adopters.

Enhance Your Creditworthiness

Improving your credit score and financial profile can qualify you for the top rates lenders offer. Pay all bills on time, pay down balances, and correct any errors on your credit report in the months preceding your solar loan application. Rates below 10% often require credit scores over 700. Maintaining low credit utilization and stable income sources also helps.

Offer Security Through Collateral

Lenders may accept certain assets as collateral to secure solar loans, especially for larger system costs. This gives them recourse in case of default, allowing them to offer better rates. Home equity or cash savings accounts are commonly used as collateral.

For solar leases or PPAs secured by the equipment itself, lenders may file UCC-1 liens against the installed system to protect their interest in the equipment. This necessitates excellent credit scores for approval.

Make a Sizeable Down Payment

Paying 20-30% or more of the system cost upfront as a down payment shows lenders you are financially committed. This encourages them to offer better interest rates since you are immediately paying down a portion of the loan principal. Even 10-15% down can help improve rates.

Extend Your Loan Term

While a longer-term increases your total interest costs, it lowers your monthly payment by spreading repayments over up to 20 years. This larger monthly cash flow impact allows lenders to reduce rates. However, try to repay faster once installed to minimize total interest.

Federal Solar Tax Credits Reduce Effective Rates

Claiming the 26% federal solar tax credit in the year you install solar lowers your tax liability by 26% of the system costs. When factored in, this credit reduces the effective financing rates considerably.

For example, on a R100,000 solar system, claiming the R26,000 tax credit is like immediately paying down 26% of the loan principal. A stated 8% interest rate becomes just a 5.9% effective post-tax credit.

Solar Financing Protection Policies

Certain policies help protect solar system owners if they sell their home or their financing provider goes out of business:

Solar Loan Assumably

Solar loans are often assumable, meaning the remaining balance transfers to the new homeowners if you sell the house before paying off the solar loan. They continue making payments and benefitting from the system.

Loan Transferability

Transferring solar loans to a new servicer involves paperwork but protects your existing terms. Changing loan providers does not reset rates or obligations.

UCC Fixture Filings

Solar lessors/providers record UCC-1 fixture filings on the title to establish the equipment is collateral not part of the sale. This protects their ownership of the gear if you sell it.

Insurance

Maintenance insurance ensures any defects or performance shortfalls are covered by the installer vs. the financier. And performance insurance guarantees compensation if the solar provider goes bust.

Understand All Solar Financing Fees

Beyond interest rates, compare other fees involved:

• Origination Fee – Upfront fee for processing and underwriting a solar loan, typically 0-2% of the loan amount.

• Application/Documentation Fee – Usually $50-$150 to cover costs of paperwork for loans or leases.

• Prepayment Penalty – Potential fee if paying off a solar loan early, make sure terms permit prepayment.

• Late Fees – Carry significant penalties around 5% of the monthly payment amount. Avoid through on-time payments.

• Maintenance & Repair Fees – With leases/PPAs, factor in any maintenance or equipment repair fees passed through.

• Payment Processing Fees – Online payment portals often carry small transaction fees of around $2-$5 per payment.

• Taxes – Sales tax applies to leased/financed equipment in some areas. Property taxes may increase.

Carefully accounting for all interest charges and associated fees allows for accurately projecting total costs and modeling the ROI of your solar investment.

Payment and balance Tracking for Solar Financing

Once your solar loan or lease is underway, remain diligent by:

 

Automating Payments

Set up automatic monthly payments from your bank account to the lender to avoid any missed payments leading to late fees. Automation also reduces mental energy spent on bills.

 

Paying Down Quickly

Making additional principal prepayments when possible, to pay off the balance faster and reduce total interest expenses. Some lenders let you double up monthly payments.

 

Refinancing as Rates Drop

If market rates fall substantially below your fixed solar loan rate, explore refinancing options after a few years to lower rates and increase savings. But weigh closing costs.

 

Claiming All Tax Incentives

Maximize federal, state, and local tax credits available and apply rebates to your balance. Account for all incentives when projecting ROI.

 

Avoiding Penalties

Note any early termination provisions on PPAs or lease terms. Ideally, fully buy out the contract when ready to upgrade panels or move.

 

Tracking Performance

Monitor your solar production levels each month to ensure the system delivers the estimated savings versus financing costs.

 

Securing Financing for Solar Expansions

Over time, secure additional financing to expand your solar array capacity as efficiency improves or energy needs increase.

 

Handling End-of-Term Options

At the end of your solar lease or PPA term after 15-25 years, you can extend the contract, have panels removed, purchase the system, or renew new equipment.

Proper solar financing tracking ensures you maximize savings while meeting financial obligations.

 

Bundling Solar + Storage Financing

With the falling costs of lithium-ion batteries, pairing energy storage with solar now makes economic sense for many homeowners. There are a few options to finance solar plus storage combinations:

• Bundled Loan – Take one larger solar loan covering both solar panels and batteries. Often cheaper overall than two separate loans.

• Separate Loan Buckets – Some lenders designate loan pools for the solar portion and battery portion to optimize loan terms for each.

• Cash + Loan Hybrid – Use cash for either the solar or battery segment and finance the other portion. Reduces interest costs.

• Lease/PPA – Solar leasing/PPA providers now often include battery options in monthly payment plans.

• HECM Reverse Mortgage – Unlock home equity via a reverse mortgage line of credit to fund a solar + battery installation.

• Discuss the best strategy to finance a solar + energy storage system with lenders able to handle combined clean energy projects.

Maximize Value with Solar Financing

Solar financing delivers crucial benefits making rooftop solar investments affordable for South African homeowners, businesses, schools, non-profits, and other entities. Comparing multiple lenders, negotiating favourable rates, minimizing fees, and leveraging incentives provide significant long-term savings and enhance energy independence. Consult reputable solar financing advisors to identify the optimal financing package for your needs. The sun and savvy financing are an unbeatable combination providing decades of free solar power!

As you evaluate lenders and discuss options, asking the right questions ensures you get clarity on all financing details:

• Are there any fees or charges beyond the interest rate you quoted? Get full transparency on origination fees, prepayment penalties, processing fees, etc.

• How does the federal solar tax credit work with your financing? Confirm how the ITC tax savings affect your net costs.

• Can I pay down the loan early or prepay installments? Make sure your loan terms allow paying ahead to reduce total interest.

• Do you securitize the loans and sell them to another servicer? Understand how loan transfers between institutions work.

• How long does the underwriting and approval process take? Aim for solar financing offers within 1-2 weeks, otherwise shop elsewhere.

• Is there a minimum credit score required? Get clarity on credit requirements according to your lender’s tiered rate levels.

• How will equipment defects, maintenance, and repairs be handled? Solar loans make you responsible, while leases do not.

• Who handles insurance claims and coverage? Review what insurance policies on the system the lender requires.

• What are my end-of-term options when the PPA or lease terminates? Make sure terms are favorable.

Thoroughly discussing all facets of solar financing alternatives helps identify the optimum funding solution tailored to your situation.

 

Installing solar power delivers tremendous savings and energy independence for South African homes and organizations. While paying cash upfront is ideal, it is not financially feasible for many. Luckily numerous competitive solar financing options exist, making rooftop PV affordable through loans, leases, and PPAs.

Research lenders thoroughly to get the lowest rates and optimal terms for your needs. Look to established banks along with specialized solar financiers and compare multiple offers. Reduce costs further by negotiating rates, minimizing fees, and leveraging incentives.

Proper financing can make owning solar systems cost-effective with little or no money down. This allows South Africans to quickly reap the benefits of solar power – reduced energy bills, predictable costs, sustainability, and self-reliance. Contact trusted solar advisors to navigate the financing process and unlock optimal solar savings. The future is bright for families and businesses embracing solar energy solutions.