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The FinanceFlick: How Financing Solar is Like Ordering Pizza
Welcome to The FinanceFlick! Today, I want to touch base on financing when you’re considering buying a commercial solar asset. You might wonder, why bother with financing if you can buy it all in cash upfront? Well, let’s unpack this:
Why Financing Makes Sense
If you remember from one of my previous articles about the ITC, I mentioned some other perks that come with buying solar assets, like depreciation and cash flow. So, why does financing make sense even if you can pay it all upfront? Let’s break it down.
Getting the Most Bang for Your Buck
Think of your solar investment like ordering a pizza. Imagine you want a $1 million pizza (that’s a lot of cheese!), but you decide to cover $600K (equity) out of your pocket and borrow $400K (debt). The ITC and depreciation are calculated on the total cost of the pizza, but your out-of-pocket cash was only a portion of that total amount. Essentially, you get more slices for your buck because the tax credits and depreciation are based on the full pizza cost.
How Debt Repayment Works
Now, you might be thinking, “Sure, I get more financial perks up-front, but what about the debt repayment? What’s the interest rate, and how…
