Photovoltaics · 4 min read

Financing a PV direct investment: how to succeed with financing and subsidies

This guide refers to German law and the German tax system. It is a translation of our German original and does not replace individual tax or legal advice.

With rising demand for solar direct investments, the form of financing is also coming into focus for many investors. Because the photovoltaic direct investment occupies a special position under Germany's Renewable Energy Sources Act (EEG, Erneuerbare-Energien-Gesetz), sufficient attention should be paid to its financing. To help you make optimal use of its special tax features, we have listed the most important aspects of financing photovoltaic systems. We also tell you what you should always look out for when choosing your financing partner, so that your return is not reduced by high interest rates.

As an independent financial adviser, Neo Capital supports wealthy private individuals in structuring their financial investments optimally. Our focus is on using tax models and developing your retirement provision ideally. By advising on and financing solar direct investments, we help you convert taxable income into private wealth. Sign up for a consultation and find out how PV systems and other IAB investments can lower your income tax sustainably.

Photovoltaic financing – equity or debt?

Because the bank needs security, the question of financing usually goes hand in hand with a certain equity ratio. As with a classic property financing, a certain amount of equity is also recommended and required for a solar investment. Practice shows that 20–30% of the loan amount is ideal. This is due to the IAB status of a PV system, which can be taken into account with up to 50% depreciation in the year of purchase. This saving can be used directly to cover the equity in order to reduce the costs of the photovoltaic financing. You can find more information on the special tax treatment of PV systems in our article on IAB-eligible PV direct investments. With the tax refund of 50% in the year of purchase as an Investitionsabzugsbetrag (IAB, investment deduction), the equity can be provided from the income tax that would otherwise be payable. In one step, the tax burden is reduced while the same amount is used as expenditure for the photovoltaic financing. In contrast to the long terms of alternative asset classes, banks plan photovoltaic financing with a term of 16 to 20 years. Over this period, a minimum level of income is ensured by the state feed-in tariff, which the bank assesses as security. With the recommended equity of approx. 20% and a term of around 20 years, a possible repayment plan can be derived. It is important that all information about the PV system is available when the photovoltaic financing is concluded. This way you avoid surcharges and rejections despite sufficient creditworthiness.

Solar direct investments with optimal returns

Thanks to the energy transition and rising demand for renewable energy, the photovoltaic direct investment stands out with a high return. While operators of small solar installations on their own premises calculate with an average return of 6.50% p.a., PV projects with more than 1,000 square metres can achieve returns of up to 10.00% p.a. or more. To ensure that most of this return is not eaten up by your bank's interest, thorough preparation is necessary. This includes in-depth discussions with industry experts, sufficient creditworthiness and precise information about the PV system and the installation site. As the latter can be obtained through a lease, no security in the form of the property is needed. If such security is available, however, it can lead to considerably more attractive financing conditions for the photovoltaic direct investment. The sometimes high investment sum for a solar direct investment holds the prospect of an attractive "solar pension". For the investment to have the best possible effect on your financial situation, your return should not be swallowed up by the photovoltaic financing. If you invest on poor terms, you will be left with considerably less profit over the repayment period, apart from a one-off tax saving. Depending on your personal situation, equity and the quality of advice, intensive planning can achieve first-class results for your financial provision over the coming decades.

Neo Capital: your partner for PV investments and financing

Photovoltaic financing stands or falls with how your strategy is developed. The fact that it has to go beyond a one-off tax saving becomes particularly clear in discussions with banks. We provide comprehensive support to our clients in structuring PV direct investments and ensure that PV systems, whether arranged by us or by third parties, can be financed on optimal terms. Together with our team of experts and external advisers, nothing stands in the way of your solar direct investment. With numerous PV projects each year and independent comparisons of various banks, we structure tax-optimised investments every day on the basis of income that would otherwise be taxable. Would you like to have your PV system, arranged by us or by a third party, financed? Once you submit your documents, we will assess the chances of attractive financing for your photovoltaic system. Together with your creditworthiness, a specific solar direct investment and details of your equity, we, as experts in independent financial investment advice, will begin planning your investment. Contact us without obligation and arrange a digital consultation with one of our advisers.