Hire-purchase is a commercial finance product that enables a financier to purchase energy efficiency equipment on behalf of your business. The financier agrees to give you use and possession (hire) of the equipment in return for regular instalments. Once the final payment has been made to the financier the customer takes ownership of the energy efficiency equipment.
No upfront capital or security
Hire-purchase allows for energy efficiency projects to be undertaken and may require some upfront capital or security of existing business assets. This may assist your business in accessing finance for future business growth over a longer term.
Realising savings now
Financing energy efficiency projects can result in immediate cash flow benefits for the business. Energy efficiency projects can result in higher savings than loan costs.
Tax and accounting
The financer owns the asset resulting in an off-balance sheet finance arrangement for your business. As your business pays instalments back to the financier, these payments may be deductable at your company tax rate. Seek specific tax and accounting advice for your particular situation.
As the business is considered the owner of the asset, the business bears the risk associated with owning the asset. Hire-Purchase finance may be more appropriate for larger equipment that is easy to remove and where costs are predominately for physical assets.
Businesses can also receive a discount on energy efficient products that are installed by accredited Victorian Energy Upgrade (VEU) providers. A list of these products and providers can be found on the ESI website.
Visit victorianenergysaver.vic.gov.au for more information.
The Clean Energy Finance Corporation (CEFC) has developed hire-purchase finance offering with co-financiers which specifically targets the energy efficiency needs of small businesses, manufacturers, the agricultural sector and small-scale commercial property.
Hire-purchase finance identifies technologies that meet the CEFC’s investment guidelines and offers a capital lease with 0.7% discount comparable to standard capital lease products. This program is offered by a range of financiers. Visit https://www.cefc.com.au/where-we-invest/asset-finance.aspx for more information.
Correct as at January 2018.
Level 28, Urban Workshop,
50 Lonsdale Street, Melbourne VIC 3000
Phone (03) 8626 8700
Published by Sustainability Victoria.
Sustainable Finance – Hire Purchase
© Sustainability Victoria January 2018
Disclaimer: The information provided in this document is general advice only. It does not take into account your particular needs or objectives and does not constitute legal or accounting advice. Accordingly, any comments or statements made are not a recommendation that a particular course of action is suitable for you and you need to seek your own legal, tax and accounting advice in relation to your specific circumstances.
This information is true and correct as of January 2018
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