Green loans can help reduce the cost of a heat pump.
When the government pledged to make Britain a ‘clean energy superpower’, they said the benefits would include lower bills, greater energy independence and 650,000 new high-quality jobs.1 Luckily for the planet, our reliance on renewable energy has made that easier than ever and the way we generate new energy has completely changed from what it was 50 years ago.
Sounds great - but the upfront costs of home energy technology like electric vehicle chargers, solar panels and air source heat pumps can be significant. Green loans from UK banks and building societies are emerging as a solution to help small and medium enterprises (SMEs) front the costs and make the transition to cleaner energy,
What is a green loan?
Green loans are designed to help eligible UK businesses finance energy tech like EV chargers, solar panels or heat pumps on commercial buildings. They help SME customers improve their energy efficiency and invest in energy tech.2 Green loans are available from various UK banks or building societies and the eligibility criteria and borrowing options vary depending on who you get a loan from.
Some mortgage providers offer cashback incentives to their customers when they install green technologies or implement energy saving improvements. At the time of writing this, both Lloyds and Barclays are offering cashback payments of up to £2,000 when their mortgage customers make green improvements to their homes like fitting a heat pump or solar panels.
Other mortgage providers offer cash back or advantageous interest rates on properties with EPC A or B ratings and you can also find lenders offering 0% loans to their mortgage customers to fund energy saving improvements to boost a property’s EPC rating.
If you have a mortgage, it’s probably worth checking if you are entitled to any deals when investing in green technology or buying an energy efficient property.
Why do banks offer green loans?
Banks offer green loans for a few key reasons.
To support SMEs financially to purchase renewable energy technology and contribute to the UKs environmental goals.
Hit your businesses environmental responsibility goals.
To support any projects your business has to reduce their carbon emissions. For example, installing EV chargers for EVs instead of standard petrol or diesel powered cars.
Regulatory compliance. Banks and building societies have strict environmental regulations so offering loans demonstrates their commitment to these regulations.
What can businesses use green loans for?
As you’d expect, there’s pretty strict criteria for what green loans can be used for. Here’s a few examples:
Buildings. If you need to retrofit parts of your property or equipment to allow energy tech to be installed, your green loan can help you foot the bill.
Energy. The technology needed to generate your new renewable energy, and storage systems for this energy.
Transport. Buying EVs, or building a fleet of EVs.
Agriculture. Green loans can be used to finance renewable technology that has a direct effect on: crops, livestock, marine life, forest restoration or conservation.
As always, it's wise to shop around. Different lenders have different criteria and benefits, so make sure to compare your options before committing to a loan.
How do green loans work?
Green loans often come with incentives to encourage uptake:
Cashback. Many lenders offer cashback on green business improvements. This means you get a lump sum back after completing your project.
0% finance. Some lenders offer 0% interest rates for a set period on loans for energy efficiency improvements.
Preferential rates. Lower interest rates may be available on green mortgages for energy-efficient buildings (those with high EPC ratings - A or B).
However, as mentioned previously the eligibility criteria and what you can do with your loan varies between lenders and you’ll be eligible for different perks depending on where you take your loan out from. so it’s best to double check all the information before taking out a loan.
Where do you get a green loan?
Green loans are available through many UK banks or building societies, for example NatWest currently have options to borrow from £50,000 right the way up to £10,000,000. Price comparison can help you see what’s available, so if you don’t know where to go or what amount you can borrow they’ve got you covered.
Tips for securing a green loan.
There’s quite a few green loan options out there, so before making the leap it’s worth considering whether a green loan will be right for youHere’s a few tips of things you should consider before making your final decision.
Think about what you need. What level of financing might you need? Do you have a clear idea of how much your energy tech or building improvements will cost?
Shop around. It’s always good to have options, so you know you’re getting the best deal. Compare interest rates, cashback offers, and loan terms from different lenders.
Improve your EPC rating. Before agreeing to a loan, think about your EPC rating. Could you improve it? The higher your EPC rating, the higher your eligibility for better rates and cashback offers are.
Get quotes. Have multiple lenders look at your property and let you know what they can offer. Don’t be afraid to get a quote, even if you don’t take out a loan with them eventually.
Can I take a green loan if I have already applied for a heat pump grant?
Yes, you can often combine a green loan with a government grant like the Boiler Upgrade Scheme. This can significantly reduce the upfront cost of installing a heat pump.
Want to know more about energy saving, grants and schemes for your business? Head to /business to learn more.