No Capital Outlay
What Is Meant by ‘No Capital Outlay’?LED lighting is proven to be more energy-efficient and sustainable than traditional incandescent lighting systems. But many workplaces still refuse to update their infrastructure, even given the proven energy savings made over time with an LED system. Those energy savings are directly transferred into cost savings, but the prospect of having to stump up the capital outlay is enough to deter many companies from investing. At Eco Lighting Specialists, we offer a financial plan that takes away this barrier to investment in LED lighting infrastructure, and that can essentially make the switch cost-free over time, with no capital outlay needed at all. But what do we mean by ‘no capital outlay’? Let’s take a more in-depth look, to clear up any confusion. Capital outlay is defined as ‘money spent to acquire, maintain, repair, or upgrade capital assets’. Capital assets are assets that have a lifespan longer than one year. This means that all of your business infrastructures, be it an office, warehouse, vehicle or computer system, count as a capital asset if they’re designed to last for multiple years. Included in that is your important infrastructure – and that includes your lighting systems. When a business needs to invest in new infrastructures, such as lighting, they traditionally pay a capital outlay to make that investment. For businesses, that’s a huge upfront cost and it’s perhaps more difficult to justify because it’s more difficult to claim back a capital asset as an expense. Because the lifespan of the investment is longer than one year, you can only claim back a portion of the value of the asset each tax year. That means that if you spent £10,000 on a new computing system you would not only pay all of that money upfront and create a hole in your finances, but you wouldn’t be able to claim £10,000 in expenses off your profit and loss charts that first tax year.
How Spreading the Cost of Investment Benefits Your BusinessBusinesses need to invest in their future to survive. But for many businesses, that can be difficult if there is a lack of capital funds to pay for something upfront. Despite the fact that LED lighting can save between 70 and 90 per cent on energy bills, it’s difficult to justify those savings if there’s little capital to make the expenditure in the first place! We understand, but we also have a solution. And it’s a solution that can save your business huge cost savings over time while spreading out the initial payments of the new infrastructure. LED lighting systems in a workplace can be designed and installed in a ‘no capital outlay’ scenario. This means that a business has no upfront capital expenditure. Rather than paying for the entire new lighting system upfront and out of the company accounts, the new lighting system is paid for in instalments. No capital is required upfront to make the purchase and our finance team will instead work out a repayment plan that can be spread over several years. You’ll be able to save your much-needed capital for other important assets and only pay off a certain amount each month or year. This expense can then be claimed back when your company files their taxes at the end of the tax year.
How the Cost Savings of LEDs Can Make Your Installation Cost NeutralBetter yet is the fact that a no capital outlay payment structure will actually help the business to save money over the coming years. The installation costs of the new lighting system can ultimately balance out to zero as well – a welcome prospect for any company accountant to see! LED lighting offers huge energy savings that translate into costs savings, too. We estimate that LED lighting will be up to 90 per cent more efficient than traditional, incandescent lighting. Depending on the total cost of your company’s energy bill each year, the repayments on the new LED lighting system will quickly balance themselves out. In the best scenario, your company could even be achieving more savings from its lower energy bills than it’s paying out each year for the new lighting system. Before we ask you to commit to a new lighting system from Eco Lighting Specialists, we always demonstrate how long it will take for your business to realise these savings and how long it will take for the new infrastructure to pay for itself. You’ll be pleasantly surprised at how quickly the savings exceed the repayments.
What If I Do Want to Pay Upfront for a New LED Lighting Installation?Not all businesses will need to spread the cost out if they have plenty of capital in their accounts. In fact, for businesses that want to pay upfront for their new LED lighting installation, there are currently some very inviting government schemes available to incentivise the switch. With a focus on building a sustainable future and reaching carbon-zero, the government is helping businesses that want to lower their carbon footprint and reduce their energy bills. To make the upfront cost of switching to greener energy a more attractive prospect, businesses are able to claim back all of the tax allowances on their investment in the first year, rather than spreading it out over multiple years, as is traditionally the case with capital outlay (as we explained earlier in the article). The Enhanced Capital Allowance Scheme is valid on energy saving installations, including LED lighting infrastructure, and it can help to lower the initial outlay of capital by allowing you to claim the entire investment as an expense in the first tax year. Of course, to do this a business still needs all the money upfront or they will need to secure a loan. For this reason, a no capital outlay finance scheme and gradual repayments are often the most attractive option.
Why Should I Make the Switch to LED Lighting?
Other than the potentially huge energy and cost savings that your business can quickly realise from LED lighting, there are many other benefits that will come with a new LED system. We already mentioned that the investment can pay for itself through energy savings, but did you realise that LED lights last longer and need less maintenance than traditional lights? LED lights are incredibly robust and resilient, and they can last up to 20 years without needing to be replaced. That means that there are even more cost savings to be enjoyed for your business. LED lights also shine much brighter than traditional bulbs, despite using less energy. In an industrial setting, brighter light is essential for health and safety, while in the office LED lights can produce a more ambient and welcoming work environment. LED lights are not only good for business, but they are excellent for the planet too. Your business will have a greener outlook and can start to take more responsibility for its energy usage to help the environment.