Asset Finance for Renewable Energy
Get in touchRenewable energy is an expanding industry with an increasing number of companies offering services within the renewable energy sector.
Renewable energy equipment is not cheap and so renewable energy projects are often only possible if a company is able to spread the cost when setting up or for larger renewable energy projects.
We will be looking at renewable energy costs and finance and how you can apply for this to get started on your sustainable energy projects, restructure existing debt, and improve your cash flow.
Asset finance may be new to you or something you have prior experience with regarding business finance options.
Whatever your experience levels in asset finance, we are here to help, whether for a refresher regarding your funding solutions or information to improve your income stream.
Get in touch with us today and we will help you to find out what asset finance experts can do for your finance projects and how government incentives can help too.
What is Renewable Energy Asset Finance?
Asset finance for the renewable energy sector allows you to spread the cost of new equipment and purchases to raise additional working capital for your business needs.
When purchasing new equipment, such as electric vehicles, to reduce carbon emissions, you may not have the cash flow to purchase the vehicles outright. This is where asset finance can help your business.
You can fund your initial investment by using a hire purchase option where you are able to spread the cost over a longer period at a lower payment amount.
There are several other types of asset finance available for your business, each offering cost savings for purchases of equipment for your renewable energy projects.
To find out which is best for your business, we recommend you speak to an asset finance company directly or to your business accountant to discuss the best funding options for your business needs.
Which Renewable Energy Products does Asset Finance Cover?
Asset finance can cover a range of renewable energy products, including:
Solar Panels: Solar panels can be financed through asset finance, allowing businesses and homeowners to install a renewable energy system without a large upfront cost.
Wind Turbines: Wind turbines can also be financed through asset finance, allowing businesses and communities to harness the power of wind to generate clean energy.
Biomass Boilers: Biomass boilers can be financed through asset finance, allowing businesses and communities to use sustainable fuels such as wood chips or pellets to generate heat and electricity.
Geothermal Systems: Geothermal systems can be financed through asset finance, allowing businesses and communities to harness the steady temperatures underground to generate clean energy.
Hydro Power: Hydro power systems, such as micro-hydro systems, can also be financed through asset finance, allowing businesses and communities to generate clean energy from falling water.
Energy Storage Systems: Energy storage systems, such as batteries, can be financed through asset finance, allowing businesses and communities to store excess energy for later use.
Asset finance will generally cover the costs associated with any heat and power (CHP) equipment that you need to reduce your business's carbon footprint.
Following the government's pledge to reduce greenhouse gas emissions by investing in sustainable energy, renewable energy finance applications have increased significantly.
Whether you are looking to purchase solar panels for your offices to reduce the use of fossil fuels and decrease your energy bill or install wind turbines on your company's land, asset finance can help.
Renewable energy equipment can be costly for those who are investing in the equipment for the first time.
It may also be time to refresh your renewable energy equipment with improved solar panels or newer LED lighting, and this renewable energy finance solution can also assist with those purchases.
What is the Application Process for Renewable Energy Finance?
The application process can vary depending on whether you apply to the lender directly or apply through a broker but it typically involves the following steps:
Determine the funding needs: The first step is to determine the funding needs for the renewable energy project, including the cost of the equipment and installation, as well as any additional costs associated with the project.
Gather financial information: The next step is to gather financial information, including financial statements, tax returns, and other relevant financial information to support the application for financing.
Choose a lender: The next step is to choose a lender who specializes in renewable energy finance, either a traditional bank or a specialty finance company that focuses on financing renewable energy projects.
Complete the application: The application process typically involves completing an application form, providing financial information, and submitting any required supporting documentation.
Review and negotiation: The lender will review the application and negotiate the terms and conditions of the financing agreement, including the interest rate, repayment terms, and any collateral requirements.
Sign the agreement: Once the terms and conditions have been agreed upon, the borrower will sign the financing agreement, and the lender will disburse the funds for the project.
Install the equipment: The final step is to install the renewable energy equipment, with the funds provided by the lender, and start generating clean energy.
The application process is similar to other credit applications, and you will apply for an amount that will cover your sustainable energy projects. You can choose the type of financing that will meet your needs.
Each company that you are applying with should outline its application process before you begin to apply.
If you have any questions, we recommend asking them before beginning the application to avoid any confusion or problems.
Call us today to find out more!
What Types of Finance are there for the Renewable Energy Industry?
There are several types of finance available, including the following:
Hire Purchase
Hire Purchase is a very popular option that is usually used for large items such as wind turbines, biomass boilers, and air source heat pumps.
This option allows you to pay for the items while you use them at a lower monthly cost than buying outright.
At the end of the hire purchase term, you will then have the option to pay a further amount to own the equipment, or you can return the item to the hire purchase company.
The best part of this option is that you can then do the same finance option for the newest model of each piece of equipment.
Refinance
A refinance option allows you to release the capital available in the equipment that you already own.
The capital in wind turbines and biomass boilers can then be used to finance another sustainable energy project. Such projects can then further reduce your energy bill and reduce your use of fossil fuels.
Finance Lease
Finance Lease is another term for renting equipment from the company.
Prior to installing the equipment, you will agree on a rental term and amount with the finance company. You will then have the option to continue to rent the equipment and renegotiate the terms or return the equipment.
Operating Lease
An Operating Lease is another form of rental finance.
However, unlike a permanent or long-term piece of equipment, this option would be used to rent equipment as and when you require it.
This is an excellent option if you want to keep down the finance costs and only need some of the equipment for your sustainable energy project at certain times of the year.
Contract Hire
Contract Hire is generally used for vehicles. It is a way of contracting out the vehicle hire for your business.
You will be able to access sustainable energy vehicles without having to source or maintain them yourself.
What are the Benefits of Renewable Energy Asset Financing?
There are several benefits of renewable energy asset financing, including:
Access to Capital: Renewable energy asset financing allows project developers to access capital to finance the development and construction of renewable energy projects. This can be especially important for projects that require large up-front investments, such as wind or solar farms.
Lower Costs: Renewable energy asset financing can help reduce the costs of renewable energy projects by allowing project developers to spread the costs of the project over a longer period of time. This can help to reduce the upfront costs and make renewable energy projects more affordable.
Increased Efficiency: Renewable energy asset financing can help to increase the efficiency of renewable energy projects by allowing project developers to focus on the development and construction of the project, rather than seeking and securing funding.
Reduced Risk: Renewable energy asset financing can help to reduce the risk of renewable energy projects by transferring some of the risk to the lender or investor. This can be especially important for projects that involve new technologies or that are located in areas with limited infrastructure or access to grid power.
Improved Returns: Renewable energy asset financing can help to improve the returns of renewable energy projects by providing a stable and predictable source of financing. This can help to ensure that projects are completed on time and on budget, which can improve the overall financial performance of the project.
Increased Investment: Renewable energy asset financing can help to increase investment in the renewable energy sector by attracting private investment and providing a stable and predictable source of financing. This can help to support the growth of the renewable energy industry and encourage the development of new technologies.
Environmental Benefits: Renewable energy asset financing can help to support the development of renewable energy projects, which can help to reduce greenhouse gas emissions and improve energy security. By financing the development of renewable energy projects, asset financing can play an important role in reducing dependence on fossil fuels and promoting sustainable energy use.
What are the Disadvantages of Renewable Energy financing?
Some disadvantages include the following:
You do not own the equipment until the terms of the finance have been met in full.
The equipment can be repossessed and removed if repayments are not honoured.
Some finance companies impose limits on the use of the equipment, which you can be charged for exceeding.
FAQs
How Long Can I Have for the Finance Period?
The period of the financing will depend on the company you apply through and their terms for the financing.
The company may have a set finance period depending on the type of equipment, amount borrowed, or several other conditions.
It is best to have a look at several financing options and companies before choosing which you will sign a contract with.
This will allow you to see what the market average is and find out what the best term you can get is.
How much Asset Finance Could I Get?
Again, this will depend on a number of factors; the size of your business, the company finances, and other factors that can impact the amount you can borrow.
It is best to contact the finance company you are considering to see what they can offer before beginning the application process.
Summary
You can apply for finance to cover sustainable energy equipment of any size, from LED lighting to wind turbines.
Reducing your business's carbon footprint is an important part of sustainable energy financing and something most companies are now looking to do.
In line with government targets, a reduced carbon footprint and more sustainable energy projects for combined heat and power (CHP) are becoming more accessible but are expensive.
Accessing finance options is more necessary now than in the past, and finance companies are ready with a range of options to help your business.
If you are at all unsure of the type of finance that is best for your business or the finance company to go with, we recommend that you contact them.
This is usually a very quick and easy process via email or telephone, excluding UK bank holidays.
When you are choosing a finance provider, it's important to choose one that is authorised and regulated by the financial conduct authority.