funding your energy saving projects
TRANSCRIPT
Funding your energy-saving projects
Before you leap into finance speak to Clear…
How can I implement my energy projects more quickly AND efficiently?Payment Over Time makes sound financial sense.There are many ways to express this method, some use the term Leasing, others Lease Rental, Finance Lease, or Payment Over Time.
They are in fact all the one and same thing! The main point is that it is the best way to fund your energy-saving project
Why you should use Payment Over Time - Customer Benefits1. Customer enjoys a return on their
investment immediately - You can purchase now, your business enjoying the benefits now. - The benefits often outweigh the costs of the scheduled
repayments, producing a positive revenue flow.- With cash, you have to wait often years until the
investment reaches the break-even point. Why wait!
1 3 5 7 9 11 13 15 17 19
-£30,000
-£25,000
-£20,000
-£15,000
-£10,000
-£5,000
£0
£5,000
£10,000
£15,000
Bala
nce
of re
turn
on
inve
stm
ent(
£)
No. of months following up-front cash purchase
Paying by Cash - return from Investment based on £28,700 refit costs
= NEGATIVE RETURNS
Break-even point – a wait of over 2 yearsUp front cash
expenditure of £28,700 on investment
Period of negative return
1 4 7 10 13 16 19 22 25 28 31 34 37 40£0.00
£200.00
£400.00
£600.00
£800.00
£1,000.00
£1,200.00
£1,400.00
Mon
thly
Cas
h
pos
itiv
e ga
ins
(£)
Monthly repayment schedule (3yrs)
The same project, but Paying Over Time- £1,162 monthly savings, monthly lease payments of £1,008
Cash Positive Monthly by £154
1 3 5 7 9 11 13 15 17 19£0
£2,000
£4,000
£6,000
£8,000
£10,000
£12,000
Bala
nce
of in
com
e fr
om in
vest
men
t(£)
No. of Monthly repayments
36 x £154 = £5,544!
Paying through leasing- Cumulative cash positive earningsThose £154 monthly revenue-positive earnings really do add up!
Further Customer BenefitsTax advantages – commercial customers enjoy 100% tax allowances on each paymentThis is a major reason that companies choose to use leasing instead of a loan or cash. You can gain typically between 20%-23% back on each lease payment through the tax allowances. This typically results in the final total repayment figure of say 36 payments totalling LESS than the original Capital Cost.…………..
1 4 7 10 13 16 19 22 25 28 31 34 37 40£0.00
£200.00
£400.00
£600.00
£800.00
£1,000.00
£1,200.00
£1,400.00
Mon
thly
Cas
h
pos
itiv
e ga
ins
(£)
Monthly repayment schedule (3yrs)
The Tax Allowances give you a fantastic benefit!E.g. On a £1000 monthly lease payment, if a company pays 23% corporation tax on its profits, it will receive £230 back in the form of tax-not-paid. This makes the real value of the lease payment only £770
Tax relief
Cash positive gains thru savings
1 3 5 7 9 11 13 15 17 19£0
£2,000
£4,000
£6,000
£8,000
£10,000
£12,000
Bala
nce
of in
com
e fr
om in
vest
men
t(£)
No. of Monthly repayments
Tax allowances bring huge benefits!Hence, the approximately £230 a month tax benefit amounts to £000’s extra revenue in-
come over the period.
Tax benefit
Revenue from sav-ings bene-
fit
Customer Benefits1. Customer enjoys a return on their investment immediately – they can
purchase now, their business enjoying the benefits now. The benefits sometimes outweigh the costs of the scheduled repayments, producing a positive cash flow. With cash, they have to wait often years until the investment reaches the break-even point. Why make them wait!
2. Tax advantages – customer enjoys 100% tax allowances on each payment (Non-sovereign risk)
3. You pay gradually in instalments – retain liquidity in your organization, so you can gain interest, or invest in your core business
4. You protect your existing credit lines – a new line of credit is valuable to your business!
5. You can afford to do additional projects, either now or during the lease term, because you’ve spread your costs
6. Their investment is flexible – you can invest in additional new higher-efficiency/profit equipment whenever you want and add to the lease as you will be credit-cleared
7. Lower ‘sign-off’ levels to empower you to make decision making at lower management, speeds up decisions, because it is revenue expenditure, not capital expenditure
Cash V Rentals
Because assets depreciate, and because of the tax benefits that leasing offers, leasing will always be a more cost efficient way of acquiring equipment.
Assets won’t depreciate on the customer’s balance sheet with a lease.
- Would you buy a house if you knew it was going to devalue?
- How many companies buy their vehicles these days?
Get in Touch!We would be delighted to help you start making savings now, so please contact us on:- Tel. 01277 239932- [email protected]