Capital lease finance

A capital lease is a commercial finance product that enables a financier to purchase energy efficiency equipment on behalf of a business. The business makes regular payments to the financier to lease the equipment but, as the payments are considered installments, the business owns the asset for accounting purposes.

Capital lease finance may be a good fit if your business:

  • requires longer term financing with low monthly payments
  • requires less upfront cost
  • prefers ownership of assets and requires the asset to be on its balance sheet
  • requires less paperwork, fast approvals
  • needs to upgrade energy efficiency equipment.

How it works

  1. The customer enters a lease agreement with the lessor
  2. customer then receives funding for the proposed project
  3. financier pays a contractor for the project installation and costs
  4. customer has ownership of the equipment which must be declared as an asset and lease payments as a liability on its balance sheet
  5. The customer can purchase the equipment at the end of the lease term at a nominal price. 
  6. As the business is considered to be the owner of the asset for accounting purposes. The business may be able to claim depreciation of the asset. Further, the interest payable on the debt may be deductible at the company tax rate. Seek specific tax and accounting advice for your situation. 

A good place is to contact your bank directly and ask about their energy efficiency capital lease options. 

Loans amounts are between $7500 and $5 million. Contact your bank to understand their amounts. Terms range between one and seven years depending on the type of loan, bank and amount.

The interest on the finance and depreciation of the asset may be tax deductible. Please seek advice from an accountant for more information.


  • Most major banks and financiers offer capital lease finance. Currently some financiers provide concessional finance for energy efficiency equipment upgrades. For more information visit the Clean Energy Finance Corp website
  • No upfront capital or security. Capital leases allow for energy efficiency projects to be undertaken without a business requiring upfront capital or using existing business assets as security
  • Realise savings immediately. Businesses that use finance for their energy efficiency projects can realise immediate cash flow benefits. Energy efficiency projects can result in higher savings than financing costs.


  • Project risk. As the business is considered the owner of the asset, the business bears the risk associated with owning the asset
  • Size and length limitations. Leases have a minimum project cost as well as a maximum length of around 7 years
  • No specialised benefits. Unlike other options, they don’t guarantee things like performance or maintenance of equipment
  • Creditworthiness. Your businesses creditworthiness may have an impact on finance availability and rates which are offered.

More information

Businesses can also receive a discount on energy efficient products that are installed by accredited Victorian Energy Upgrade providers. For more information visit the Victorian Energy Saver's energy advice for business webpage

Want to know more? Get in touch with:

Vivek Kotak

Sustainable Finance Lead

+61 3 8626 8781


Capital Lease Finance fact sheet

A capital lease is a commercial finance product that enables a financier to purchase energy efficiency equipment on behalf of a business.

Correct as at January 2018.

Sustainability Victoria
Level 28, Urban Workshop,
50 Lonsdale Street, Melbourne VIC 3000
Phone (03) 8626 8700
Published by Sustainability Victoria.
Sustainable Finance – Capital Lease
© 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