Leasing Options for Energy Efficiency Projects and Mechanical Upgrades
As a turnkey energy solutions partner, Sander Mechanical has established close relationships in the lending community to help make financing of your next capital improvement or energy efficiency project as seamless as possible.
The leasing options we bring to the table enable businesses and building owners to minimize the up-front capital costs needed to reduce their annual energy spend. Our lending partners will provide up to 100% of the funds needed to implement high-efficiency HVAC upgrades and energy conservation measures (ECMs), allowing customers to see the immediate benefits of energy savings, while making lease payments over time (instead of at contract signing). The leases are typically structured so that the payments are less than the projected energy savings, ensuring a positive net cash flow for clients right from a project’s inception.
Our trusted leasing partners offer clients both capital leases and operating leases, depending upon specific needs and circumstances.
- Capital Leases transfer ownership of the leased equipment or project. The accounting treatment of a capital lease is therefore similar to an outright purchase. Lessees are obligated to report a capital lease as an asset and a liability on the balance sheet; and, as such, may claim depreciation on the assets (and deduct the interest expense component of the lease payment each year).
- Operating Leases transfer only the right to use the technology from the lessor to the lessee. Unlike a capital lease, legal and economic ownership of the equipment resides with the lessor indefinitely. Since the lessee does not assume the risk of ownership, the lease expense is treated as an operating expense on the income statement and the lease does not affect the balance sheet. In effect, the lessee is paying rent for the service the equipment provides, rather than paying for the equipment itself.
Depending on the specific lease structure, lessees may purchase the assets for $1.00 or the fair market value (FMV) at the end of the lease.
- Avoids Project Delays – When it comes to energy projects, time is literally money. Leasing can prevent delays in equipment acquisition, by eliminating the need to budget for the purchase in advance. This is particularly important when considering that one year of energy savings can be greater than the entire cost of financing.
- Preservation of Capital and Bank Lines - By using a lease to finance your project, you can keep your cash and bank credit lines free for other initiatives.
- Payments Match Cash Flow - Lease payments set to match estimated energy cost savings provides net positive cash flow with little or no up-front cost.
- Fixed Rate Financing – Leasing is a fixed expense. With the uncertainty of interest rates and inflation, it can be advantageous to lock in long term expenses – with today’s dollars. Also, a fixed payment based on estimated savings reduces risk involved with some performance-based payment arrangements.
- Tax Advantages - Potential for building owner to capture tax benefits (capital lease) or receive lower interest rates due to the Lessor capturing tax benefits (operating lease). If treated as an operating expense, the lease payments can be fully deductible.
Sander Mechanical will make your path to upgraded equipment and dramatically reduced energy costs easy by setting you up with the optimal financing vehicle to help pay for it. Contact us today to learn more.