Financial institutions are offering micro, small, and medium enterprises (MSMEs) longer loan tenures, flexible repayment structures, and specialized financing products to support rooftop solar adoption and reduce upfront investment barriers.

However, lenders say weak financial discipline, missing regulatory approvals, and unrealistic project cost estimates can delay or affect loan approvals. They advise businesses to assess project viability, equipment costs, and repayment capacity before seeking financing.

Rooftop Solar Financing

Syed Farman Imam, AGM at Small Industries Development Bank of India (SIDBI), said the institution has supported green investments for more than two decades, initially through energy-efficiency financing for MSMEs. It has collaborated with institutions including KfW and the Japan International Cooperation Agency to provide concessional funding.

SIDBI offers financing covering 100% of rooftop solar project costs against a fixed deposit equivalent to 25%–30% of the project cost, which serves as the borrower’s contribution and security.

Imam said rooftop solar installations can generate electricity cost savings over time, helping businesses offset their investment.

MSMEs can apply for financing online or through SIDBI branches, with assistance available for digital applications.

Longer Loan Tenures

Rohit Kumar, Chief Manager at Bank of Maharashtra, informed that the bank offers repayment tenures of up to 20 years for eligible renewable energy projects, with extensions to 25 years possible in certain cases.

The bank also offers ballooning repayment structures, allowing borrowers to make smaller initial payments that increase over time as project savings materialize. Loan tenures must take into account the useful life of the assets.

The bank also finances eligible solar vendors, including those serving residential customers.

Interest Rates and Credit Assessment

Imam said SIDBI’s marginal cost of funds-based lending rate stood at 8.3%, with indicative lending rates ranging from 8.5% to 9.5%, depending on the borrower’s credit assessment.

Kumar said Bank of Maharashtra’s lending rates started at approximately 8.4% but could reach double digits for higher-risk borrowers. Final rates depend on individual credit profiles.

Loan Approval Challenges

Banks assess whether proposed equipment costs align with the selected technology and prevailing market benchmarks. They also evaluate suppliers and contractors, as poor project execution can affect system performance and repayment capacity.

Kumar advised businesses to consult lenders before finalizing detailed project reports, noting that both inflated and underestimated project costs can complicate financing.

He cautioned MSMEs against investing in solar projects solely because subsidies are available or neighboring businesses have adopted the technology. Instead, they should evaluate their electricity requirements, equipment quality, system efficiency, asset life, and ability to repay loans.

Imam encouraged MSMEs to identify their financing requirements and compare available lending products before selecting a lender..

Industry experts shared these insights at Mercom India’s recent C&I Clean Energy Meet held in Lucknow.

The next C&I Clean Energy Meet will be held in Pune in November 2026. Click here to register.