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Green finance dipiction

PPA vs loan: why specialist green finance is a better fit for renewable energy projects

Looking at PPA vs loan finance for solar? Here's what you need to know about specialist green finance options.

When considering how to fund a renewable energy project like solar PV, most businesses think in simple terms about whether to take out a business loan to overcome the barrier of the high upfront capital cost of the project.

But there’s a different and often superior option; specialist green finance.

Unlike traditional loans, which are rigid and generic, or PPAs, which mean giving up ownership, specialist green finance is designed to get projects done, maximise savings, and flex to your commercial needs.

In this comparison, we’ll explore:

  • Why traditional loans often fall short

  • Where PPAs work and where they don’t

  • How specialist green finance combines the benefits of both, and more

Summary table: PPA vs loan vs green finance

Feature
Traditional Loan
Specialist green finance
Power purchase agreement (PPA)
Designed for energy Projects?
No
Yes
Yes
Maintenance responsibility
Yours
Yours
Covered by provider
Length of agreement
Limited flexibility
Short or long term available
Long-term (15–25 years)
Repayment terms
Fixed, inflexible
Tailored to project ROI
Pay per kWh at fixed or variable price
Accounting flexibility
None
Yes: choose on/off balance sheet options
Off balance sheet (usually)
VAT handling
Paid upfront
Flexible: defer or roll in
No VAT impact
Ownership of system
Yes
Yes (HP). Optional (lease)
No
Upfront capital required
Yes
No (100% funded via HP or lease)
No

Traditional loans: familiar but inflexible

Traditional loans might feel like the default option but they come with real commercial drawbacks:

  • Rigid terms: fixed repayments, fixed durations, little ability to tailor to project needs. Traditional loans are usually a take it or leave it type option

  • No connection to project outcomes: you repay the loan whether the project performs or not

  • Upfront VAT burden

  • No alignment with energy savings or ROI curve

  • Always sits on your balance sheet

 

It’s finance designed for general use, not tailored to energy transformation.

This one-size-fits-all model is rarely the most efficient way to fund a renewables project.

Specialist green finance: funding that flexes with you

This is where specialist green finance stands apart. It’s structured around the project, for the project, and in support of the business case.

Key benefits include:

  • Tailored repayment terms: match finance to your energy savings profile. Funders in the green energy space are renowned for flexibility to try and make projects work as they share our mission to help get more sustainability projects done

  • Choice of structure: hire purchase (you own it) or asset lease (you use it)

  • Balance sheet flexibility: structured to support your accounting preferences

  • VAT flexibility: options to roll into finance or defer

  • Short or long terms available: not locked into a 20–25 year contract like with a PPA

  • Structured for ROI, not just repayment

 

Green finance is geared to enable projects, not block them. That’s why Optify only works with funders who specialise in this kind of flexible, outcomes-focused lending.

PPA: low commitment, but less control

A power purchase agreement can seem attractive especially with no upfront cost. But it has its own trade-offs:

Pros:

  • Zero CapEx required

  • You only pay for the electricity you use

  • No maintenance responsibility

  • Off-balance-sheet

 

Cons:

  • You don’t own the system

  • Long-term contract (15–25 years)

  • Lifetime savings usually lower than ownership models

  • Limited flexibility or exit options

 

It’s a good fit when simplicity is the priority, not when flexibility or control matter most.

Which option is right for you?

Objective

Maximise long-term value and ROI

Keep system off balance sheet

Fund without CapEx but still own

Prefer to avoid responsibility

Want predictable monthly outgoings

Already have Capex allocated

Best Fit

Specialist green finance

PPA or structured lease

Green finance (HP)

PPA

Green finance

Loan or green finance

We act on your behalf to:

  • Model and compare PPA, loan, and green finance in real-world terms

  • Identify the most flexible, affordable funding structure

  • Tailor the funding to your specific requirements

  • Ensure your project is cash-positive and board-approvable

  • Act as your commercial lead between funder, installer, and you

 

We don’t sell panels. We build bulletproof business cases and get more projects done with better outcomes.

How Optify helps

Next step

Build the business case for your renewable energy project.

A calculator and graphs

Further resources: see other comparisons to help you find your best-fit funding option

Solar panels

Buy solar panels vs PPA

A guide to help you establish whether using Capex or opting for a power purchase agreement could be the right route for your renewable energy projects

Documents with financial projections

Funding options side-by-side

Our full guide on renewable energy funding options compares the benefits of asset finance funding options as well as PPA compared with using capex

Final word

Finance should fit your project, not force you to fit around it. Traditional loans are rigid. PPAs give up control. Specialist green finance unlocks the benefits of both with flexibility you won’t find anywhere else.

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