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An SME guide to financing energy efficiency projects

Enabling SMEs to invest in energy efficiency for their business

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Energy efficiency projects typically pay for themselves within a few years through the energy cost savings achieved. This makes them attractive investment projects, however, they typically require an initial upfront capital investment (potentially a very large one).

Finance guide overview

Published May 2019

Energy efficiency in a small or medium sized enterprise (SME) has a direct impact on profitability. Energy cost reductions can free up cash that can be directed at more productive activities, such as expansion, or developing new product lines or services.

A business may have their own cash available for this capital investment, or a small/ young business may be able to borrow money from friends and family. Where this isn’t possible, or a business doesn’t want to use their own cash for the capital investment, financing options can be explored.

Financing can be a very effective way to invest in energy efficient equipment as the cost savings incurred can make a project cash positive from day one (if the energy savings are greater than the loan repayments). The challenge for businesses is firstly around the availability of finance, and second the implicit cost of finance through interest and fees.

This 21-page guide about Energy Efficiency Financing introduces the main financing mechanisms available to help businesses invest in energy efficient equipment, allowing businesses to save energy, cut costs and increase profit margins.

Guide contents:

  • Introduction
  • Building the Business Case
  • Financing options for energy efficient equipment
  • Loans
  • Asset-based financing
  • Leasing
  • Energy Service Contracts through Energy Service Companies
  • Grants
  • Tax incentives - enhanced capital allowances
  • Next Steps
  • Go online for further information

Publication date May 2019; Publication code CTV071.

Information in this report was correct at the time of publication.

Download the guide:

Further Information

The Carbon Trust has the following specific sector overview publications which may be more relevant to certain sub-sectors:


Energy efficiency support

The Carbon Trust Green Business Fund offers energy efficiency support for small and medium-sized businesses in England, Scotland and Wales.

If you'd like to improve energy efficiency of your organisation, see our services for small to medium enterprises to find out how we can help.

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