How to finance your sustainability strategy
Embracing clean energy offers significant benefits to businesses, including lower electricity bills, improved public relations, fewer service disruptions, and a significant ROI. It’s little wonder why most Australian businesses are looking for ways to reduce their environmental footprint as clean energy usage is on the rise.
Whether your business is at the beginning of its sustainability journey or building in its current environmental ethos, there are several finance options available from your lender and the Clean Energy Finance Corporation (CEFC).
Finance for energy efficient businesses
The CEFC, on behalf of the Australian Government, invests in technologies and projects to cut emissions across the Australian economy. CEFC’s asset finance programs have been created in partnership with major banks, specialised lenders and funds, to offer businesses an incentive to choose leading clean energy assets when undertaking new equipment purchases, property fit outs and vehicle upgrades.
Equipment Finance
Asset or equipment finance is a loan type which enables businesses to purchase new equipment without a significant initial financial outlay. This type of finance is often secured against the value of the asset you are intending to purchase, similar to a car loan or a home mortgage.
Through their asset finance programs, the CEFC has delivered more than $1.27 billion in tailored asset finance to around 18,000 smaller-scale clean energy projects across Australia. This finance has seen a number of financial institutions provide sustainable financing options for eligible SME businesses looking to invest in equipment to reduce their energy costs and lower their emissions. Examples of eligible equipment include rooftop solar, electric vehicles, refrigeration and heating, ventilation and air conditioning, irrigation and even lighting. CEFC business loans typically offer a discount on headline rates for investments into clean-energy assets.
Power Purchase Agreements
A Power Purchase Agreement (PPA) is where a third party has a renewable energy system (solar or wind) or can install a system on your premise, and you enter an arrangement to purchase the power from that provider at a lower electricity price. The PPA provider is the installer, owner, operator and maintainer of the solar PV. This arrangement avoids the capital expense of buying your own system. The typical duration of a PPA ranges from 7 to 15 years.
There are several benefits to PPAs, including no upfront or ongoing operational costs as the PPA provider is responsible for the system upkeep. Solar PPA is also lower than the cost of grid electricity, and there’s potential for expansion to include battery storage. Thus, your savings could grow overtime with no capital outlay.
Commercial Hire Purchase
A hire purchase agreement is similar to equipment hire in that you pay a fixed monthly repayment. A financial institution takes ownership of the equipment and rents it back to the business. However, in contrast to equipment hire, you are working towards ownership of the asset and will own it outright after a set period. This arrangement provides businesses with a minimal upfront cost, with a low ongoing payment which can be offset by the electricity savings from using renewable energy or more energy-efficient appliances such as lighting.
The benefits offered by commercial hire purchase include preserved working capital, fixed rate financing and there’s generally no additional security required beyond the asset itself.
Each of these finance options offer different benefits depending on your business needs. To find out how BOQ Finance can help your business become more sustainable, talk to one of our dedicated finance specialists today on boqefcustomerservice@boqfinance.com.au
Finance provided by BOQ Equipment Finance Limited ABN 78 008 492 582 (BOQEF). BOQEF is a wholly owned subsidiary of Bank of Queensland Limited ABN 32 009 656 740 (BOQ). BOQ does not guarantee or otherwise support the obligations or performance of BOQEF or the products it offers. This blog post is for general information purposes only and is not intended as financial, taxation or professional advice. It has not been prepared with reference to the financial circumstances of any particular person or business and should not be relied on as such. You should seek your own independent financial, legal and taxation advice before making any decision about any action in relation to the material in this article.
