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Restricted access to credit from traditional lenders such as high-street banks is forcing manufacturers to come up with innovative finance schemes to encourage their customers to invest in energy-efficient equipment.
German giant Siemens has joined forces with the Carbon Trust to provide £550 million of green equipment financing over the next three years for the purchase of energy-efficient equipment such as biomass heating.
Siemens Financial Services will provide the funding for the Energy Efficiency Financing scheme, while the not-for-profit Carbon Trust says it will independently assess the carbon, energy and cost savings of any investment project, enabling engineering firms to accurately establish payback periods.
The scheme is available for a wide variety of projects including building technologies, such as pipe insulation and air conditioning, and industrial process technologies, including compressed air, refrigeration and specialised production equipment. The scheme may also be used to fund combined projects, such as replacing heating and lighting. Financing is available for £1,000 upwards, with no set upper limit. However, the scheme does include lending costs in the form of annual percentage rate (APR) interest.
Tom Delay, chief executive of the Carbon Trust, said: “Driving green growth in the UK is key to our economic recovery. A missing ingredient at present is access to affordable finance to enable business to make green investments. This finance facility will improve business competitiveness, cut carbon and boost green growth.”
Meanwhile, compressed-air group Atlas Copco has introduced what it called a “no-strings” 0% APR finance scheme to encourage investment in energy-efficient compressed-air technology. The scheme has been available on equipment ordered since 1 July.
Elwyn Smiles, sales manager for northern Europe at Atlas Copco Customer Finance, said the company had introduced the scheme because engineering firms were still finding it hard to get banks to lend to them at competitive rates. This meant many companies were having to make do with old, inefficient equipment.
“There’s no doubt that banks are a lot tougher on their terms and the deposits they require,” said Smiles. “Everyone is more cautious these days, particularly the bank-owned finance companies. There are niche brokers out there, but the traditional larger players are nowhere near as active as they once were.
“The effect is that engineering companies are not investing. They are sitting back and waiting. And as a result of this inertia their businesses are suffering because they are operating with old, inefficient equipment. It’s a vicious circle.”
Atlas Copco said that 0% finance would be available on any of its stationary compressors and associated equipment. Loans can be taken out for a period of up to seven years and the amount can be anything from £1,000 upwards.
Unlike the Siemens/Carbon Trust scheme, Atlas Copco does not require carbon assessment criteria to be met in order for the equipment to qualify for the funding. “The loan approval and funds release are very smooth and quick and not reliant on government bureaucracy – a criticism levied at previous schemes,” said Smiles.
Atlas Copco said its offer compared favourably with the Siemens/Carbon Trust Energy Efficiency Financing scheme. Smiles said: “It is significantly cheaper, in fact up to 25% cheaper in some instances. For example, a loan of £31,000 for a 75kW variable speed drive compressor over an agreement period of 60 months would cost £641.08 plus VAT per month under the Energy Efficiency Financing scheme. Under our scheme, it would cost significantly less at £516.66 plus VAT per month.”
Smiles admitted that Atlas Copco was taking a risk lending to companies that might subsequently go bust owing money. “It’s a risk we are willing to take,” he said. “Atlas Copco is a company that benefits from good liquidity and cash availability.
“We understand our business and we understand our customers. The right discussions regarding lending will be held and therefore the right decisions will be made.”