How to Build Finance Partnerships with Local Credit Unions for SME Solar Projects

Hook: Turn high electricity bills into a community finance win

Procurement teams and solar suppliers face the same squeeze: rising energy costs, smaller margins, and slow decision cycles at SMEs that can’t afford high upfront capital. Partnering with local credit unions to design bespoke loan products solves two problems at once — it unlocks lower-cost capital for SME solar projects and gives credit unions a high-impact community lending line that fits their mission.

Why credit unions now? 2026 market context and opportunity

Late 2025 and early 2026 saw three converging trends that make credit-union partnerships timely:

• Persistent energy-price volatility putting SME operating budgets under pressure, increasing demand for on-site generation and storage.
• Credit unions modernising digitally — faster onboarding, API-friendly core systems and appetite for community-focused green lending.
• Growing regulatory and customer interest in local, traceable decarbonisation outcomes — credit unions can credibly fund community energy transitions.

These trends mean procurement teams and suppliers can secure a competitive financing partner that values local impact as much as yield.

How this guide helps

This tactical playbook walks you through partner outreach, loan product design, underwriting criteria, commercial models and co-branded marketing tactics. It assumes a UK context (MCS-accredited installers, SME customers, and local credit unions) and is designed for practical use by procurement teams, project managers and suppliers.

Stage 1 — Prepare: internal alignment & baseline data

Before you reach out, get your house in order. Credit unions will want clear metrics and a replicable process.

1. Define the target SME cohort. Size (turnover, employees), sector (manufacturing, retail, care homes), roof suitability and average energy spend.
2. Model project economics. Produce standardised payback models, IRR scenarios and sensitivity to energy price changes. Provide examples for purchase, lease, hire-purchase and power purchase agreements (PPAs).
3. Quantify risk mitigation. List installer accreditation (MCS), equipment warranties, performance guarantees, and operation & maintenance (O&M) contracts.
4. Create a single-page pilot offer. One sheet showing loan size bands, indicative rates, typical repayment profiles and expected lifetime energy savings for fast review.

Stage 2 — Partner outreach: how to approach credit unions

Credit unions are relationship-driven. Your first contact should be with lending or business development leads.

Who to target

• Head of Lending / Commercial Lending Officer
• Business Development / Partnerships lead
• CEO or Executive who owns strategic initiatives

Outreach sequence (practical script)

1. Warm intro via a shared local stakeholder (chamber of commerce, council, energy hub).
2. Email with a one-page pilot offer and a short case study showing realised savings.
3. Follow-up call to propose a 60–90 day pilot: 10–15 loans to local SMEs, co-branded marketing and a simple referral workflow.
4. Offer a joint board pack and risk assessment template so the credit union’s credit committee can move quickly.

"Credit unions want impact and low admin burden. Make it a low-friction pilot with measurable outcomes."

Stage 3 — Loan product design: practical templates

Design loan products that fit the SME cashflow and the credit union’s appetite. Below are three practical structures with example economics.

1. Asset-backed term loan (purchase)

• Purpose: Customer purchases solar + battery outright.
• Tenor: 5–12 years.
• Security: Fixed charge on assets; assignment of warranty & O&M contracts; personal guarantees as required.
• Example economics: Competitive APR (illustrative) 4–8% depending on credit; LTV up to 100% of installed cost less any grant.
• Use case: SMEs who prefer ownership and want accelerated depreciation benefits.

2. Energy asset lease / hire purchase

• Purpose: Installer (or partner special purpose vehicle) retains title; SME pays staged lease or hire-purchase installments.
• Tenor: 5–10 years.
• Security: Lease agreement, early termination fees, maintenance included optionally.
• Example economics: Slightly higher monthly cost than purchase but lower upfront capital. Effective APR depends on residual value assumptions.
• Use case: SMEs with capital constraints or those who want predictable OPEX.

3. On-site PPA with a loan overlay (supplier-funded PPA with credit union-backed buyout)

• Purpose: Supplier owns and bills for energy (PPA). Credit union provides a refinancing loan or guarantees to the supplier/SPV.
• Tenor: 10–20 years (for asset ownership).
• Security: Assignment of PPA cashflows; step-in rights on default.
• Example economics: Attractive for end-users (no capex) with predictable tariff; credit union supports supplier balance sheet or purchases asset-backed note.
• Use case: Businesses that want zero capex and prefer energy-per-kWh pricing.

Stage 4 — Underwriting criteria tailored to SME solar

Standard business-lending checks are necessary, but credit unions will want solar-specific underwriting to assess repayment risk tied to energy savings and asset performance.

Core underwriting checklist

1. Identity & capacity: Company registration, director IDs, VAT returns.
2. Financials: Last 2–3 years financial statements, management accounts, cashflow forecasts including projected savings.
3. Energy baseline: Historical energy consumption (12–24 months), supplier invoices, existing tariff details.
4. Technical due diligence: Roof survey, site feasibility, soil or roof loadings, MCS compliance, BOM and inverter details.
5. Installer accreditation & contracts: MCS certification, installer warranty terms (≥10 years panel, ≥5–10 years inverter), O&M contract (optional).
6. Performance guarantees: Any P50/P90 generation estimates, insurer-backed availability guarantees.
7. Grant & incentive check: Eligibility for local grants, tax allowances (capital allowance eligibility) and timing of any payments. See the Green Tech Deals Tracker for regular updates on incentives and local schemes.
8. Legal documentation: Charge registrations, lease consent if landlord involved, assignment templates.

Scoring model (example)

• Credit strength (30%): Financial metrics, EBITDA, DSCR.
• Energy replacement ratio (25%): Expected energy savings / current electricity spend.
• Technical risk (20%): Installer grade, equipment warranty, site complexity.
• Collateral & security (15%): Charge, guarantees, assignment.
• Local impact & compliance (10%): Community benefit, alignment with credit union mission.

Set score thresholds for automatic approval, senior underwriting review and board sign-off.

Stage 5 — Commercial models and revenue sharing

Choose a model that aligns incentives between the credit union, supplier/installer and procurement team.

Common structures

• Referral fee: Fixed fee per signed loan (e.g., £250–£750) paid to installer or broker.
• Origination & servicing split: Credit union retains interest revenue; supplier retains O&M margin; origination fee shared 50/50.
• Participations: Supplier or third-party buys down a portion of the loan risk (credit enhancement) in exchange for yield share.
• Guarantee facility: Supplier provides a partial guarantee or reserve to reduce credit union capital at risk and enable lower pricing.

Define performance KPIs: conversion rate, average ticket size, arrears rate, and lifetime energy saved per loan. Agree escalation and exit clauses in the MOU.

Stage 6 — Co-marketing and referral programs that work

Marketing is where procurement teams and suppliers create pipeline. Credit unions bring trust and membership channels; suppliers bring product expertise. Combine forces.

High-ROI co-marketing tactics

• Member webinars & breakfast briefings: Practical sessions that show payback calculators and a 20–30 minute case study.
• Co-branded campaign kit: Email templates, landing pages with a savings calculator, pre-approved loan badges and downloadable case studies.
• Local trade events: Partner at Chamber of Commerce events and local authority business energy clinics.
• Installer referral dashboard: Simple CRM integration (Zapier or API) to pass and track referrals; unique referral codes for attribution.
• Success stories & social proof: Short video testimonials from local SMEs, showing before/after bills and simple payback summaries.

Referral program mechanics

1. Define a straightforward incentive — e.g., £500 paid on loan drawdown to the referrer.
2. Set clear anti-gaming rules and disclosure obligations.
3. Automate tracking: referral code → application → decision → drawdown.
4. Report monthly KPIs to maintain momentum and adjust rewards.

Stage 7 — Operations: digital onboarding, compliance & servicing

Operational simplicity accelerates lending volume.

• Digital applications: A one-page application that captures energy baseline, site consent and preferred product.
• KYC & AML: Use digital ID verification and aligned AML checks to reduce friction.
• Document packs: Pre-drafted charge forms, assignment agreements and warranty assignments for fast signing.
• Automated repayments: Direct debit or standing orders, with clear reconciliation between loan and O&M payments if bundled.
• Portfolio monitoring: Track arrears, energy savings vs baseline, and asset performance. Consider telemetry data feeds for large portfolios.

Risk mitigation and stress testing

Stress test loans to understand downside: lower-than-expected generation, early termination and macro credit deterioration.

1. Model scenarios with 10–30% lower generation and increased energy prices — see impact on DSCR.
2. Require step-in clauses and assignment triggers for long-term PPAs.
3. Consider a reserve or guarantee funded by supplier for first-loss protection on pilot portfolios.
4. Cap loan size relative to demonstrable savings to avoid over-leveraging and protect repayment capacity.

KPIs & dashboard for pilots

Measure impact and make iterative improvements. Suggested pilot KPIs:

• Applications received / referral source
• Approval rate and time-to-decision
• Conversion to drawdown
• Average ticket and tenor
• Portfolio arrears (30/60/90 days)
• Energy savings delivered (kWh & £) vs baseline
• Member satisfaction (NPS) and case-study capture rate

Advanced strategies & future-proofing (2026+)

For procurement teams looking to scale beyond pilots, consider these advanced approaches informed by late-2025 / early-2026 market developments:

• Securitisation pools: As portfolios mature, credit unions can package loans into community green bonds or notes to recycle capital and expand lending.
• Telemetry-linked pricing: Use generation telemetry to offer dynamic loan discounts or rebates for high-performing installations.
• Blended finance: Combine public green funds, local authority guarantees and credit-union capital to lower rates for disadvantaged SMEs.
• Embedded finance: Integrate financing options directly into supplier quoting tools so SMEs see payment options during procurement.
• Net-zero-linked incentives: Offer preferential pricing for SMEs committing to broader decarbonisation plans beyond the solar install.

Practical examples and quick templates

One-page pilot offer template (text to adapt)

Offer name: Community SME Solar Loan Pilot — Q2 2026

• Target: 10–15 SME projects, average ticket £25k–£75k
• Product: Asset-backed term loan, 7-year tenor, indicative APR 5% (subject to credit)
• Security: Fixed charge on assets; assignment of warranty & O&M; no personal guarantee for loans < £50k
• Referral fee: £500 on drawdown
• Co-marketing: 2 webinars, 3 local events, co-branded mailers
• Reporting: Monthly KPI pack and quarterly review

Underwriting checklist (one-page)

1. Company & director IDs — verified
2. 2-year accounts + YTD management accounts
3. 12–24 months energy invoices
4. MCS installer confirmation
5. Roof/site survey summary
6. Warranty & O&M contract attached
7. Grant eligibility confirmed

Common objections and rebuttals

• Objection: "Solar is risky and technical."
  Rebuttal: Use MCS accreditation, standardised technical packs and a small pilot to demonstrate predictable outcomes.
• Objection: "We worry about arrears."
  Rebuttal: Tie loan size to demonstrable savings and use direct debit repayment; consider supplier-first-loss protection on the pilot.
• Objection: "We don’t have expertise to underwrite energy projects."
  Rebuttal: Provide a templated underwriting toolkit and train the lending team; run joint credit reviews early on.

Case study snapshot (anonymised example)

In Autumn 2025 a Midlands credit union partnered with a regional installer to pilot 12 SME installs. Key outcomes after 9 months:

• Average project £38,000, average tenor 7 years
• Mean payback of 5.5 years with observed energy savings of 28%
• Approval-to-drawdown time reduced to 12 working days after templates were introduced
• Arrears < 2% — supplier-funded reserve covered first-loss exposures

This small pilot validated underwriting assumptions, produced 3 strong testimonials and led to a delegated authority increase from the credit union.

Final checklist before launch

• Signed MOU with the credit union outlining roles, fees and data sharing
• Co-branded marketing kit and a live landing page with loan calculator
• Pre-written credit pack and underwriting template
• Referral tracking and dashboard in place
• Pilot KPI dashboard and monthly governance cadence agreed

Closing — Why this partnership wins

Credit unions offer an underused channel for SME solar adoption: trust, community reach and flexible capital that can be structured for real-world SME cashflows. For procurement teams and suppliers, a carefully scoped pilot — honest underwriting, clear incentives and co-marketed customer journeys — transforms long sales cycles into bankable pipelines.

Call to action

Ready to build a credit-union finance partnership for your SME solar projects? Contact our team for a free 30-minute strategy session and receive a starter toolkit: one-page pilot offer, underwriting templates and co-marketing checklist to accelerate your first 10 deals.

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