Managing Your Cashflow with a Solar Loan
For Illinois homeowners and farm property held in your personal name (like a sole proprietorship), the key considerations in juggling a solar payment plan include:
- Monthly Payment which depends on:
- Amount financed
- Interest rate
- Length of financing term (the longer period results in lower monthly payment)
- The timing of receiving the 30% federal tax credit value
- The timing of receiving the Illinois SREC (solar renewable energy credit)
- Your monthly electric bill savings
In Illinois your monthly electric bill savings may not be exactly enough to offset the monthly cost of the solar loan. However, with the Illinois SREC or other state rebate, it’s possible to achieve positive cashflow on an annualized basis. Some months you may have negative cashflow (where the loan payment exceeds your energy savings). When the SREC payment is received, that will give you a big bump for the year and often put you “in the black” (or in a positive cashflow position). Adding the value of the 30% federal tax credit will provide an additional boost. You have to be a prudent manager of your monthly expenses and solar income (electric bill savings, SREC or rebate income, etc).
The graph on the left illustrates how the electricity savings or avoidance, tax credit value, SREC income and loan payments might occur over a 20-year period.