First Energy Solar Power Financing

Affordable rent-to-own financing

We bring you an affordable rent to own solar power financing product that will help you power up your home or business without delay. We’ve seen a trend towards financing solar power investments by borrowing against existing bonds or home loans, but we believe choosing this financing product is better than choosing your bond.

Here’s why:

Bank Bond

Rent to Own Financing

Advantages

  • Client may see that the bank bond is cheaper over the longer term.
  • Borrowing over the existing bond stretched the payments over 15 to 20 years.
  • House bonds are seen as less risky for clients with marginal budgets.
  • The bank can also offer a hedge against market downturns, as bond prices tend to increase during times of economic uncertainty.
  • Merchant West discloses it charges.
  • A Client can settle early at any time.
  • Merchant west discloses its early settlement terms.
  • [ Net Present Value ]+ 3 months interest.
  • The financing doesn’t lock in the client for 15 to 20 years.
  • Clients may want to utilize financing for additional purchases whereas a bank bond may have limits to exposure Per client’s credit facility.
  • The financing can be structured to cater to client’s need.
  • The system is costing the client what it’s quoted on over the term plus the interest component.
  • Financing overs a separate line of credit.

Disdvantages

  • Borrowing over a longer term costs more in fees to the bank.
  • Settling early may be difficult.
  • Banks may not disclose all fees in the borrowing agreement.
  • Assets may get wound up in an estate falling under the Bond agreement.
  • Clients may see the loan as more expensive.
  • Requirements are stricter to qualify for a separate facility.
  • The facility must be taken over by the new purchaser of the house when selling or the facility must be settled.

Rent-to-Own Benefits

  • No upfront cash outlay or deposits. Customers retain working capital i.e. the company’s cash flow position may preclude the outright purchase of assets or these cash funds be better utilised for working capital requirements to increase operating efficiency and / or support growth.
  • VAT is paid over the term of the rental but can be claimed back. Large upfront input VAT claims from SARS on cash transactions are avoided, as those could put the company’s cash flow under pressure.
  • Tax deductions / allowances can be accelerated by way of deducting the full rental payments over the term of the lease vs claiming Wear & Tear allowances (W&T) over the period of the asset’s useful economic life as stipulated by SARS.
  • Certain rentals are off balance sheet transactions and therefore deemed to be an expense to the customer. Off Balance sheet financing either to comply with existing debt covenants or to maintain published performance targets. New IFRS / IAS16 (previously IAS17) provides guidance.
  • Rentals can be structured with the following: Payments in advance / in arrears; with deposit; with balloon payments (reduce monthly payments over initial period); with RV’s; with escalations; skip payments or deferred payments; monthly / quarterly / semi-annual payments. It is extremely flexible and has numerous tax advantages. Flexibility in the terms of the lease could allow for escalations (which can be linked to CPI or estimated future revenues), extended lease dates, repurchase of the asset(s) or early termination rights.
Solar Power financing
  • Loan to value ratio (LTV Ratio) of 100% if compared to other financing instruments (0% deposits)
  • No need to finance the initial input VAT claim as would be the case for an HP / Instalment Sale transaction.
  • Enhance financial ratios such as debt / equity (gearing), interest cover, liquidity and working capital ratios, return on capital and return on assets.
  • Existing credit lines are unaffected (fresh source of funding).

How can we help you today?