Truck Exterior Parts,Truck Door Trim Panel,Professional Vehicle Components Structural Design,Instrument Panel Guard Board Parts Jingchuang Automotive Design Co., Ltd , https://www.compoproducts.com
Setting up a solar project can be quite expensive, with costs reaching up to INR 6 crores per MW. Most of this funding typically comes from a mix of equity and debt financing. Equity financing involves raising capital from within the company or through external investors, while debt financing—usually around 70% of the total cost—is often obtained via loans secured by collateral.
Before embarking on a solar power project, it's crucial for businesses to explore all available commercial solar financing options. Here, we aim to address some fundamental questions like how commercial solar projects are funded, what the best financing approach might be, and how long solar panel financing can last.
Let’s first consider the various ways to fund a commercial solar project.
### Domestic Bank Financing
In India, local banks have traditionally been the primary source of funding for commercial solar projects. They offer relatively low-interest rates ranging from 11-13%. However, these banks may require borrowers to pledge up to 100% of the loan amount as collateral. Initially, banks were only willing to provide loans for durations of 7-10 years. But now, thanks to regulatory reforms and the necessary formalities required for starting a solar project, banks are more open to extending loans over a period of up to 15 years.
**Read More: 6 Reasons Why Solar Power is Ideal for Educational Institutions**
### NBFC Financing
Non-Banking Financial Companies (NBFCs) such as the Indian Renewable Energy Development Agency Limited (IREDA) are also viable options for financing commercial solar projects. For instance, grid-connected solar photovoltaic (PV) projects can qualify for loans with interest rates between 10.2% and 11.4%, depending on the project's grade. It’s important to note that IREDA provides loans for projects that meet a minimum debt threshold of INR 50 lakhs and are both commercially and technically viable. One of the standout features of IREDA’s loans is that they only require a collateral of 10-33% of the total loan amount.
**Read More: Simplifying the Calculation of Solar Panel Costs**
#### Documents Required for NBFC Solar Financing
When applying for solar finance from an NBFC, the following documents are typically required:
1. Quality and safety measures implemented
2. Evacuation plans
3. Contracts for component supply
4. Permissions and compliance requirements
5. Operations and maintenance contracts
6. Performance certificate (PC) contracts
7. Feasibility studies
8. Power Purchase Agreements (PPAs)
### International Financiers in India
International players also offer a variety of options for commercial solar financing in India. The International Finance Corporation (IFC), which is part of the World Bank, provides funding for solar projects across the country. Other alternatives include EXIM Bank, the European Investment Bank, and the Asian Development Bank. Additionally, numerous green energy funds based overseas finance solar projects at competitive rates. If you’re looking to import materials for your solar project from the country providing the loan, you may be able to secure even better deals.
However, companies seeking financing from international lenders should be aware that the application process can take anywhere from 9 to 12 months.
### Due Diligence Costs
Another aspect that companies considering commercial solar projects must be mindful of is the due diligence cost, which can significantly impact the overall project budget and timeline. Some factors contributing to due diligence costs include:
1. Technical assessment
2. Promoter evaluation
3. Environmental review
4. Financial appraisal
5. Industry-specific analysis
6. Legal assessment
7. Loan approval processes
8. Insurance packages
**Read More: Key Questions to Consider Before Choosing Solar Power for Your Business**
### Conclusion
As demonstrated, there are numerous avenues for commercial solar financing. However, selecting the right financier is critical as it will heavily influence both the project’s cost and its implementation timeline. While Indian companies typically find domestic solar loans ideal for utility-scale solar projects, opting for foreign financiers could be beneficial under certain circumstances. Just ensure you manage risks associated with currency fluctuations effectively.
By thoroughly evaluating these financing options, businesses can make informed decisions that align with their goals and resources, paving the way for sustainable energy solutions.