In recent years there has been a clear drive to motivate businesses to invest in green technology projects as the government seeks to implement its 2050 net-zero strategy.
There are a host of tangible benefits for organisations to implement these projects, from cost reduction to energy resilience and reputational improvement. However, budgets are tight, costs are increasing, and core business activities take precedence, making investing large amounts of capital into green technologies even more challenging, despite compelling business cases for doing so.
Well-considered, thoughtfully structured finance agreements can offer more favourable outcomes when compared to investing outright making it easier for UK businesses to invest in green technologies.
What are the benefits of a finance agreement?
Some of the key benefits of introducing a bespoke finance agreement include:
- Avoid significant capital expenditure.
- Cash-neutral or cash-positive cashflow solution.
- Provides cost certainty and accurate financial forecasting.
- Increase scale and speed of investment.
- Increased energy efficiency and cost control by utilising new technologies.
- Tax benefits
What are cash-neutral and cash-positive finance solutions?
Simply put, these finance solutions let the investment pay for the finance and generate a surplus for the business.
A cash-neutral finance solution means the financial benefits of the project cover the cost of finance 1:1 adding no additional financial burden to the business.
However, the business takes the additional non-financial benefits associated with the project, whether this is greater control and visibility of their energy use, improved energy management, enhanced compliance with regulations and legislation or meeting environmental targets.
Cash-positive finance solutions ensure the financial benefits of the project, either through cost savings or additional income generation from the project exceed that of the repayments due under the finance agreement, generating an additional revenue stream.
The business will still reap the benefits of the non-financial factors that any new technology implemented will bring.
How does a finance agreement improve cost certainty?
Any payments due under an approved finance agreement will begin following the completion of the project. From this point, the payments due are fixed for the duration of the funding term.
SAF works closely with both the customer and the supplier to structure the finance in such a way as to make it economically viable for the customer. At a time when wider economic factors can cause significant variation in cost, knowing the absolute cost of your green technology project is fixed for a duration of up to 15 years will provide cost certainty.
How does utilising new green technologies increase efficiency?
Technology particularly within green technology is advancing all the time, with research and innovation providing a constant source of new ideas and ways to work.
New technologies can offer a faster, safer, better quality, reduction of waste, less maintenance, and lower resource usage when compared to outdated technologies. Correct utilisation of these new pieces of equipment can lead to a drastic reduction in both carbon output and costs.
SAF’s unique finance solutions that require no capital outlay can ensure the benefits of the increased efficiency can be recognised even sooner due to the savings not needing to exceed the outright payment before the benefits are noticed.
What are the tax benefits of a finance agreement?
Payments due, known as ‘rentals’ are recoverable against the profits generated by the borrowing entity, effectively reducing the company’s tax burden. Under certain funding structures, the borrowing entity may be able to claim capital allowances from SAF’s Solution.
At SAF we treat every client individually, ensuring that the necessary due diligence is undertaken to fully understand the key financial, accounting, and legal requirements of the customer and structure a funding solution that exceeds expectations.
We take a proactive approach to work with both suppliers and customers, engaging with key stakeholders and decision-makers to ensure the finance solution is as beneficial as the technical solution behind their green technology project.
SAF’s active involvement and in-depth industry knowledge help to ensure complex funding projects that would otherwise stagnate and could end up not getting off the ground come to fruition.
For more information on our finance options and how we can support your sales team, why not get in touch with our Head of Sales Phil Dring at pdring@saf-solutions.com