Commercial Solar Financing in California: 5 Options Compared, From SBA Loans to PACE

A California business can pay for solar five ways: cash, a loan (including SBA-backed loans), a lease, a power purchase agreement, or PACE financing repaid on the property tax bill. Owning keeps the federal tax credit and depreciation; a lease or PPA hands them to a third-party owner in exchange for no upfront cost. Compare signed documents for the same project, not monthly payments.

This guide is about the paperwork and the programs, and which structure tends to suit which kind of business; for every business guide, see the commercial solar hub. Sources were checked September 23, 2026.

How California businesses paid for solar in 2025

Most business owners who went solar in 2025 owned the system. In CRR's count of the CPUC's DGStats interconnection data, 2,855 of the 3,607 non-residential systems PG&E, SCE and SDG&E connected that year were host-owned, paid for with cash or a loan, and 751 were third-party owned. Of the third-party systems, 420 were power purchase agreements, 286 prepaid leases and 28 monthly leases. PPAs dominated by size, at about 86% of third-party-owned capacity.

Property-assessed financing barely shows up: only one 2025 business system was flagged as PACE-financed, though that field was blank on 490 records. Treat PACE as an option to check, not the default.

Start with one project scope

A financing comparison is useful only when each proposal describes the same project. Ask every provider to identify the system size, equipment, roof, canopy or ground-mount scope, electrical upgrades, battery scope, permits, interconnection work and service responsibilities separately.

Then compare the cash price, every payment, ownership, production assumptions, remaining utility charges and end-of-term rights. A lower initial payment does not show the total obligation or decide which party will own and operate the equipment. The commercial cost-per-watt benchmarks give you a published baseline for the cash price.

Put each financing structure on the same sheet

Understand ownership before comparing payments

The CPUC's solar consumer guide describes a purchase as a customer-owned system, while a power-purchase agreement generally has a provider own the equipment and sell the electricity it generates. Commercial agreements can be more complex, so the signed commercial contract, not a residential example or a sales label, controls the specific project.

For any third-party-owned structure, obtain the written price schedule, annual change formula, operations and maintenance duties, insurance, roof-access rights, performance terms, transfer process and end-of-term options. The guide to commercial solar leases covers equipment leases and roof leases, and how to vet a commercial PPA provider covers the PPA side.

Which structure tends to fit which business

• Profitable, with tax to offset and capital or credit: owning, with cash or a loan, keeps the federal credit and depreciation with you.
• Profitable, but avoiding a capital purchase: a PPA if you want to pay per kilowatt-hour delivered, a lease if you want a fixed payment.
• Little taxable income: a lease or PPA lets the owner use the tax benefits you could not, which the price should reflect.
• A long-held property: PACE, where the property sits in a participating district and the existing lender consents.
• A nonprofit, school, public agency or tribe: owning with elective pay, described below.

Ask each bidder to price the same project under two or three structures, with the monthly payment, the 10-year and 25-year totals and who takes the tax position under each.

Commercial solar loans and SBA programs

A loan keeps ownership, and with it the tax credit and depreciation, with your business. Banks and equipment lenders set their own terms, so the useful public benchmarks are the SBA programs. The SBA says a 7(a) loan can be up to $5 million and can be used for purchasing and installing machinery and equipment, among other purposes (page updated July 27, 2026).

The 504 program provides long-term, fixed-rate financing for major fixed assets, including machinery with at least 10 years of useful life, up to $5.5 million per transaction, with 10-, 20- or 25-year maturities. It runs through Certified Development Companies and is limited to for-profit businesses with tangible net worth under $20 million and average net income under $6.5 million over the two prior years (page updated March 30, 2026).

General eligibility does not establish that a specific solar project, borrower or term will qualify. If a proposal refers to SBA financing, request the actual lender term sheet and compare it with other offers, and keep the contractor's project proposal separate from the lender's agreement.

PACE is property-based, so check the property documents

The California State Treasurer's PACE background page describes PACE as a way to finance clean energy improvements through an assessment on the local property-tax bill in authorized districts, and notes that the assessment is associated with the property and has priority over other property-based debts in a foreclosure.

That makes title, existing-lender, district and sale documents central to a PACE review. Do not assume a program, funding source, consent, rate, term or transfer result is available at a particular property. The C-PACE guide covers how the assessment works in California.

Grants and state programs for business solar

USDA REAP. The Rural Energy for America Program serves agricultural producers and small businesses in rural areas of 50,000 people or fewer. It lists renewable energy grants of $2,500 to $1 million, covering up to 50% of eligible costs for qualifying projects and 25% for others, and loan guarantees on up to 75% of eligible costs. Its April 9, 2026 update says the agency is not accepting REAP grant applications at this time, while guaranteed loan applications may still be submitted.

GoGreen Business Energy Financing. The State Treasurer's GoGreen Business program gives participating lenders a loss reserve for loans to small businesses and nonprofits (100 or fewer employees, under $16 million in revenue, or within SBA size standards) in specified utility territories. Clean energy generation, storage and EV charging were added as eligible measures in 2024. It lowers lender risk; it is not a grant.

For storage incentives, see SGIP commercial battery storage status.

The tax credit, and whether financing reduces it

The federal credit for business solar is 26 U.S.C. §48E, and it goes to whoever owns the system: you under a purchase or loan, the provider under a lease or PPA. For a solar facility whose construction began after July 4, 2026, it does not apply to property placed in service after December 31, 2027, so any structure's timeline has to fit that date.

A common question is whether borrowing shrinks the credit. Section 48E(d)(2) applies rules similar to §45(b)(3), which reduces the credit when tax-exempt bond proceeds finance the facility, by the lesser of 15% or the bond-financed share. The statute does not reduce it for an ordinary commercial loan. The commercial solar tax credit guide sets out the rates, bonuses and transfer rules.

Nonprofits, schools and public agencies: elective pay

An owner with no income tax to offset can still use the credit. Under 26 U.S.C. §6417, a tax-exempt organization, a state or local government, an Indian tribal government or a rural electric cooperative can elect to be paid the §48E credit. The IRS says elective pay treats the credit as a tax payment and refunds it as an overpayment (IRS, checked September 24, 2026).

So a nonprofit or public owner can buy the system and receive the credit's value, rather than handing it to a lease or PPA provider. The same placed-in-service deadline applies. Have a tax professional confirm the election before you sign.

Keep utility and tax assumptions separate

A financing model can include production, utility-bill, tax or incentive assumptions. Those are not guaranteed by the financing label. Put each assumption beside its source, observation date and the party responsible for it, and get current utility and tax advice that applies to the actual customer, property, ownership model and project date.

Do not subtract a claimed incentive, utility credit or tax result from a project price until the applicable source and eligibility have been confirmed for the proposed structure.

Documents to collect before a decision

1. A line-item technical scope and cash price for the same project.
2. The proposed financing, lease, PPA or assessment agreement and every exhibit.
3. A full payment schedule, including any escalation, fees, taxes and end-of-term terms.
4. Written production, utility-tariff and remaining-bill assumptions.
5. Written allocation of ownership, maintenance, insurance, roof or site access and removal obligations.
6. Property-sale, transfer, refinancing, lender-consent and default provisions.
7. Current tax, accounting and legal advice for the business and property before signing.

Frequently asked questions

California Rate Relief is a referral service. We are not a licensed contractor. It does not lend, lease or arrange financing, and a commercial inquiry does not approve financing, select a lender or PPA provider, or promise a price, savings or project outcome.

Sources

Checked September 23, 2026.

• CPUC, California Solar Consumer Protection Guide
• California State Treasurer, PACE background and history and GoGreen Business Energy Financing
• U.S. Small Business Administration, 7(a) loans (updated July 27, 2026) and 504 loans (updated March 30, 2026)
• USDA Rural Development, Rural Energy for America Program (updated April 9, 2026)
• California Public Utilities Commission, DGStats Interconnected Applications Data Set (data through May 31, 2026); CRR count of 2025 non-residential PV systems
• 26 U.S.C. §48E and §45, Office of the Law Revision Counsel (text in effect September 23, 2026)
• 26 U.S.C. §6417 (elective payment; applicable entities and credits) and IRS, Elective pay and transferability (both checked September 24, 2026)