How to Get a Loan for a Solar Business in India: Interest Rates and Government Schemes

India's solar sector is on fire and if you're planning to get a loan for renewable energy & launch a solar business, there's never been a better time. With the market expected to grow from $38 billion in 2021 to over $238 billion by 2032, the opportunity is massive. But like any high-potential business, solar ventures need upfront capital. Whether you're starting a rooftop solar installation company, a solar retail outlet, or a solar farm, loans can help turn your idea into a profitable business.

This guide walks you through how to get a loan for a solar business in India, including schemes, documents, application steps, collateral-free options, and how platforms like StartupFlora simplify the entire process.

Why Loans Make Sense for Solar Businesses

Solar projects require significant upfront investment but promise long-term savings and consistent revenue. A loan helps ease cash flow by spreading costs over time while allowing you to build high-quality infrastructure. Many banks now classify solar as a priority lending sector, which means better terms: lower interest rates, longer repayment windows, and sometimes subsidies.

What Do You Need Money For?

Starting a solar business might involve:

• Buying solar panels and inverters
• Setting up showrooms or warehouses
• Hiring skilled technicians
• Installing large rooftop systems or solar farms
• Managing inventory for solar accessories

Loans help manage all of these. But banks and lenders want to see a clear plan.

A solar business becomes highly bankable when you can prove strong demand (like clients wanting to cut electricity costs), and a sound model (power purchase agreements or retail sales margins). MSMEs switching to solar can reduce power bills by up to 80% a stat that makes lenders more confident in your cash flow.

Major Loan Schemes and Financing Options

Here’s a breakdown of top schemes and lenders in 2025:

1. Union Bank - Union Solar

• Loans from ₹10 lakh to ₹16 crore
• Up to ₹8 crore without collateral
• Ideal for SME rooftop or ground-mounted projects

2. SBI - Surya Shakti Scheme

• Loans up to ₹10 crore
• Tenure: Up to 10 years
• Covers commercial rooftop or utility-scale systems

3. Bank of Baroda / PNB / Bank of India

• Loans for 10 kW rooftop to 30 MW solar plants
• Some banks offer retail solar loans (for individuals, societies)

4. IREDA (Indian Renewable Energy Development Agency)

• Project-specific financing
• Routes international credit (World Bank, ADB) to smaller projects
• Lower interest due to government support

5. MUDRA Loans (PMMY)

• For micro solar businesses
• Up to ₹10 lakh collateral-free
• Categorized as Shishu, Kishore, or Tarun based on loan size

6. NBFCs and Green Financiers

• Companies like Tata Capital, Ecofy, Electronica Finance
• Unsecured loans up to ₹15 lakh
• Slightly higher interest but faster processing

7. Vendor-Backed Financing

• Some solar companies (like Sunora Solar) help clients get loans via bank/NBFC partnerships

Collateral-Free Solar Loans: What’s Real?

• MUDRA Loans: RBI-mandated collateral-free loans for businesses under ₹10 lakh.
• Union Bank Solar: No collateral up to ₹8 crore, backed by project revenue.
• NBFCs: Offer unsecured loans (no collateral), based on creditworthiness.
• Project Hypothecation: Many banks secure loans only against solar equipment bought (not your property).

Required Documents

Here's what most lenders ask for:

Personal & KYC:

• PAN, AADHAAR, Passport
• Passport-size photos

Business Proof:

• GST Certificate
• MSME/Udyam Registration
• Shop & Establishment Certificate or Company Incorporation

Financials:

• ITR (past 1-2 years)
• Bank statements (6–12 months)
• Balance Sheet and P&L (if running)

Project Report:

• Solar system size, cost, expected output
• Vendor quotation
• Revenue model (retail margins or power savings)

Others:

• Net metering approvals (if rooftop)
• Vendor tie-ups
• Credit score (typically 680+)

How to Apply loan for Solar Business?

1. Define Your Loan Need: Equipment? Working capital? Installation?
2. Shortlist the Scheme: Based on loan amount, collateral-free need, or subsidy tie-up.
3. Gather Documents: Ensure business, project, and personal docs are ready.
4. Apply via Bank or Platform: Submit online, visit branch, or use StartupFlora.
5. Respond to Queries: Banks may ask for clarifications or site visits.
6. Get Sanction Letter: Review terms carefully.
7. Loan Disbursal: Money released in tranches or lump-sum based on project stage.

New Schemes (2024–2025)

• PM Surya Ghar Muft Bijli Yojana: Up to 60% subsidy on rooftop systems (boosts demand for solar installers)
• PSL Mandate: Banks must meet renewable lending targets; expect faster approvals.
• Green Credit Lines: Banks are using international funds (like ADB, KfW) to refinance solar loans at better rates.

StartupFlora: Your Business Guide

Getting a loan is tough when you don’t know the system. StartupFlora helps MSMEs and solar entrepreneurs by:

• Matching you with best-fit banks or NBFCs
• Helping with documentation and credit readiness
• Finding subsidy-linked or low-interest schemes
• Offering end-to-end support until disbursal

With a 50+ lender network like banks & NBFC and on-ground consultants, StartupFlora increases your chances of loan approval while saving time.

FAQs for Solar Business Loan

Q: What credit score is ideal for a solar business loan?

A: Aim for 700+. Some banks accept 680+ if your project and business plan are solid.

Q: Can I get a loan without income tax returns?

A: Yes, especially for MUDRA loans or first-time entrepreneurs. You may need alternative income proof.

Q: What’s the interest rate for solar loans?

A: Varies. Government-backed loans are around 8–9%; NBFCs may go up to 12–14%.

Q: How long does approval take?

A: 7–30 days depending on lender and loan size.

Q: Can I get subsidy and loan together?

A: Yes. Most banks finance the post-subsidy cost; the rest is covered by MNRE or state programs.

How to get a loan for a solar power plant?

Banks and financial institutions in India provide project loans for solar plants under renewable energy financing. To apply, you’ll need a detailed project report (DPR) covering land, technology, cost estimates, and revenue projections. Approvals from DISCOMs and relevant state authorities also strengthen your application. MSMEs can also explore schemes like the Credit Linked Capital Subsidy Scheme (CLCS), which reduces the financial burden by offering capital subsidy on approved projects.

How much loan can I get for a 1 MW solar power plant?

The loan amount usually depends on the total project cost and the bank’s lending policy. A 1 MW solar power plant in India costs around ₹4–5 crore, and banks typically finance 70–80% of the project cost. The remaining amount is covered by the promoter’s equity contribution. Some lenders may also tie loan eligibility to projected cash flow from selling electricity to the grid or through Power Purchase Agreements (PPAs).

How much collateral is needed for a solar loan?

Collateral requirements vary across lenders. For large-scale projects like a 1 MW solar plant, banks may ask for collateral covering 20–40% of the project cost. In some cases, the solar plant assets themselves (panels, inverters, land lease rights) are treated as security. MSMEs applying under schemes like CLCS may benefit from reduced collateral requirements, since the subsidy lowers the effective loan burden.

What is the subsidy on solar farms?

Government subsidies depend on whether the project is for commercial, industrial, or agricultural use:

• For rooftop solar (residential/agriculture use) – subsidies range from 20–40% of benchmark costs.
• For large-scale solar farms – there’s generally no direct subsidy, but benefits come through Viability Gap Funding (VGF), accelerated depreciation (40%), and concessional loans.
• MSMEs setting up solar projects can leverage CLCS, which provides 15% subsidy on institutional credit for eligible plant and machinery, making solar adoption more affordable.

Final Word

With the right plan and support, getting a solar business loan in India is absolutely doable. Focus on building a clear proposal, use schemes that fit your need, and don't hesitate to take help from guides like StartupFlora. The future is solar and it’s waiting for you to plug in.

Need help getting started?
Reach out to StartupFlora for a free loan assessment and find the best solar loan for your business.