Becoming a more sustainable business offers significant advantages, but funding these initiatives is a major obstacle. Research from the British Business Bank reveals that only 11% of SMEs, roughly 700,000 businesses, have secured external financing for sustainability efforts, with 22% planning to seek such finance in the next five years.
Read on to find out more about the different types of funding available, and how CQuel can help you find and apply for the correct funding for your business.
What are energy grants and subsidies and how can they benefit your business?
Grants
Subsidies
Reducing up-front costs
Small businesses can significantly lower the upfront costs associated with purchasing and installing energy-efficient equipment or renewable energy systems, such as solar panels or energy-efficient lighting. This reduction in capital expenditure can make sustainable practices more accessible and financially viable for small businesses.
For example, the government's Boiler Upgrade Scheme is a great opportunity for small businesses aiming to reduce their environmental impact and operational costs. Under this scheme, eligible businesses can receive substantial financial support towards the adoption of renewable heating technologies.
Grants are available for £7,500 towards an air source heat pump or a ground source heat pump (including water source heat pumps and those on shared ground loops), and £5,000 towards a biomass boiler. It's important to note that the grants for heat pumps were increased on 23 October 2023, providing an even greater incentive for businesses to make the switch.
To qualify, the installed system must meet specific standards, including minimum efficiency levels, and have a maximum capacity of less than 45kWth.
Could you be eligible?
Cutting operational costs
By taking advantage of energy grants and subsidies, small businesses can reduce their operational costs over time. Energy efficient equipment typically consumes less power, leading to lower energy bills. Renewable energy projects can also provide a sustainable source of energy that, once installed, can offer long-term savings and protect the business from fluctuating energy prices.
Let’s take solar panels as an example: Here, the financial benefits of installing solar panels are twofold, with significant savings on electricity bills and potential earnings from excess energy production. A typical small business with a 3.5 kilowatt-peak solar panel system could see annual savings between £160 and £420 on electricity bills at current rates, according to the Energy Saving Trust.
Furthermore, under the SEG, businesses could earn an additional average of £124 annually by exporting unused electricity back to the grid, with the exact figure depending on the tariff chosen.
The initial investment in solar panels might seem substantial, with the average cost of a system around £7,000. However, the payback period has become increasingly attractive, especially when considering grants or subsidies that can reduce upfront costs.
Typically, the break-even point ranges from 15 to 20 years, depending on electricity usage patterns and the compensation rates for exported energy. With grants, this period can be significantly shortened, enhancing the overall return on investment and making solar panels a compelling option for reducing long-term operational expenses.
Broader environmental benefits and healthier living
Beyond contributing to environmental sustainability and promoting a healthier living and working environment, investing in green practices offers significant financial advantages. Buildings with BREEAM and WELL certifications not only show a commitment to sustainability and occupant well-being, but also command a notable premium in the market.
Specifically, properties that achieve these green certifications can see an increase in their rental value, with a green premium of approximately 10%. This premium reflects not just the environmental and health benefits of such buildings, but also the growing demand for spaces that align with corporate sustainability goals.
What types of energy grants and subsidies are available for small businesses?
Government funding for green business
In the UK, from the central government to regional bodies and local authorities, a range of funding programs are accessible for small enterprises.
A variety of government initiatives are available, offering loans, grants, or incentives to help small enterprises decrease their environmental impact. These programs often facilitate:
- Improvements in energy efficiency, including modifications to production workflows.
- Financial assistance for the initial investment in energy-saving equipment.
- Efforts towards effective waste management and reduction.
- Actions geared towards achieving sustainable growth.
Around £5 billion in funding is set aside to assist UK companies in alignment with the government's goal to achieve net zero emissions by 2050. This financial support is designated for businesses that are investing in sustainable technologies aimed at enhancing energy efficiency or cutting down carbon emissions.
Green bank loans for small business
Your regular banking partner may offer specialised loans for environmental projects. Here’s just a few on offer to small businesses:
Green SME Fund
HSBC UK unveiled a £500 million Green SME Fund in 2021 to aid small and medium-sized enterprises in their transition towards a greener economy. Available to businesses with an annual turnover below £25 million, the fund offers a 1% cashback on loans starting at £1,000, encouraging investments in eco-friendly operations.
Green Loans
NatWest provides Green Loans to assist companies in achieving their environmental goals. These loans cover a variety of green activities, with an eligibility list that is periodically updated. Businesses might finance projects like installing solar panels, acquiring electric vehicles, or implementing heat pumps.
Green Trade Loans
Barclays Bank provides green trade loans designed to facilitate buying goods and materials for eco-friendly initiatives. These loans are tailored to support a range of green objectives, from improving energy efficiency and developing renewable energy sources to promoting sustainable agriculture.
Clean Growth Financing Initiative
Lloyds Bank has established the Clean Growth Financing Initiative, offering reduced rates on loans for a wide array of eco-friendly investments. This initiative, developed in collaboration with expert sustainability advisors, supports projects ranging from minor incentives to major infrastructure developments.
How can CQuel find and secure green energy funding for your business?
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