Are there green or sustainability loans for energy-efficient upgrades?

The short answer — yes, and here’s how they work

Yes, UK businesses can access green or sustainability finance to fund energy-efficient upgrades. These facilities include green asset finance, sustainability-linked loans, specialist “green” products from banks and non-bank lenders, and options supported by schemes like the Growth Guarantee Scheme. You can also combine finance with grants and incentives to reduce the net cost of upgrades.

In practice, most energy projects are funded using asset finance, term loans, or lease agreements tailored to the technology being installed. Commonly financed upgrades include solar PV, LED conversions, building insulation, heat pumps, HVAC, EVs and chargers, and smart controls or automation. The right facility depends on your asset type, payback profile, balance sheet, and sector.

Best Business Loans does not lend directly but helps you navigate suitable lenders and brokers. Our AI-driven platform matches your needs to providers who are actively funding sustainability projects in your industry. You stay in control while comparing options based on commercial fit and cash flow.

What counts as an energy-efficient or “green” upgrade?

Lenders usually categorise “green” spend as projects that reduce energy consumption, lower carbon emissions, or enable cleaner operations. Examples include lighting upgrades, power factor correction, building fabric improvements, and onsite generation like solar. Many will also consider electric vehicles, refrigeration upgrades, air compressors, and process heat electrification.

Software and controls can qualify too if they deliver measurable efficiency gains. These include building management systems, sub‑metering, smart thermostats, and production monitoring. Waste heat recovery and insulation of pipework may be eligible where savings are clear and verifiable.

Where assets are integral to production, lenders often assess both the energy improvement and the productivity gain. Strong measurement and verification plans help demonstrate savings. That in turn can unlock better terms and lender appetite.

Who offers green or sustainability finance?

Green asset finance is widely available from banks, challenger lenders, and specialist funders. Many have dedicated underwriting criteria for solar, EVs, or building energy retrofits. Lenders may offer hire purchase, finance lease, or operating lease structures.

Sustainability-linked loans are also available where your pricing is linked to agreed KPIs. These KPIs can include energy intensity, carbon reduction, or renewable adoption. Meeting targets may reduce your margin; missing them can increase it.

Some providers offer project‑based solutions or power purchase agreements for onsite generation. These can suit businesses that prefer not to own the asset. Best Business Loans can introduce you to providers aligned with your goals and risk appetite.

Important compliance note

Information on this page is for UK businesses only and is not financial advice. Finance is subject to status, affordability, and lender terms. We operate as an independent introducer and do not provide loans or credit decisions.

The main types of green business finance explained

Green asset finance funds a specific piece of equipment or a defined upgrade. It is commonly used for solar PV, LED lighting, EVs and charging, heat pumps, HVAC, refrigeration, and energy-efficient machinery. Repayments are often structured to align with expected energy savings.

Typical formats include hire purchase, finance lease, and operating lease. Hire purchase leads to ownership at term end and may suit assets with long life and residual value. Leases can preserve capital and may carry different accounting implications, so you should consult your accountant.

Sustainability-linked loans (SLLs) tie part of your interest margin to sustainability performance. You agree KPIs and a verification approach with the lender. This option suits mid‑market firms willing to track and report metrics over time.

Project finance and Power Purchase Agreements (PPAs)

For larger onsite generation, a PPA can fund design, installation, and maintenance with little or no capex. You buy the electricity produced at an agreed tariff. Ownership typically remains with the funder for the term.

Project finance may also be available for multi-technology upgrades with aggregated savings. Lenders focus on counterparty strength, technical design, and savings certainty. Independent technical assessments are common for complex schemes.

Where you prefer to own assets, long‑term asset finance can be combined with warranties and operations contracts. This can deliver predictable costs while capturing full energy savings. The choice depends on your strategy, risk appetite, and tax position.

Grants, allowances, and incentives to consider

• Workplace Charging Scheme (WCS) — a government voucher for EV chargepoint hardware and installation, subject to caps and criteria.
• Plug-in Van Grant — a contribution towards the purchase of eligible low-emission vans, subject to vehicle category and thresholds.
• Industrial Energy Transformation Fund (IETF) — support for energy-intensive businesses investing in efficiency or fuel switching, during funding rounds.
• Full expensing and capital allowances — potential tax relief for qualifying plant and machinery; seek professional tax advice to confirm eligibility.

Availability and criteria change over time, so checking current government guidance is essential. In some cases, combining a grant with asset finance reduces the financed amount. This can improve affordability while maintaining project scope.

For SMEs seeking working capital to support sustainability projects, the Growth Guarantee Scheme may be relevant. Lenders in this scheme provide term loans, asset finance, and invoice finance with a government guarantee. Eligibility and product availability are determined by participating lenders’ criteria.

When is a standard business loan suitable?

Term loans can work well for multi-asset upgrades or staged rollouts. You may prefer one loan rather than several asset agreements. This can simplify administration while funding enabling works or consultancy.

However, if your upgrade consists of discrete, depreciating equipment, asset finance can be more cost‑effective. The asset itself acts as security in many cases. That can improve acceptance where balance sheet headroom is limited.

Best Business Loans can introduce both general and green-labelled products. The key is aligning the finance structure with savings, asset life, and cash flow. A blended solution may be optimal in some scenarios.

Eligibility, costs, and what lenders look for

Eligibility depends on your trading history, financial strength, and project characteristics. Lenders typically want UK trading entities such as limited companies or LLPs. Many prefer at least 12–24 months of trading and positive cash generation.

For energy assets, funders assess the technology type, supplier credentials, and warranties. They may request savings estimates and independent verification for larger projects. Good documentation shortens timelines and strengthens your case.

Where upgrades are integral to operations, lenders consider maintenance and downtime risks. Insured warranties and service contracts can mitigate these concerns. A clear installation plan often helps gain approval.

Documents you may need

• Latest filed accounts and recent management information.
• Bank statements and aged debtor/creditor summaries where relevant.
• Project proposal, supplier quotes, and technical datasheets.
• Cash flow forecasts showing savings, if available.
• Details of existing finance commitments and assets.

For vehicle or equipment finance, a formal supplier invoice or pro forma is usually required. Solar and HVAC projects may require roof surveys or site assessments. Some lenders will also ask for insurance details post-approval.

Verification needs vary by lender and asset. For SLLs, KPI baselines and measurement plans are essential. Agreeing governance early prevents delays later.

How pricing works and typical terms

Pricing depends on credit risk, asset type, and term length. Energy assets with strong residual values may attract sharper rates. Newer technologies can price differently due to perceived risk.

Terms commonly range from 2 to 7 years for equipment and 5 to 10 years for solar. EVs often sit in the 3 to 5‑year range depending on usage and mileage. Structuring can include seasonal payments if your cash flow is cyclical.

There is no universal “green discount”, but some lenders provide incentives. These might include fee reductions or margin benefits for validated projects. Sustainability‑linked loans may adjust margins based on KPI performance.

Risks, constraints, and how to manage them

Underperformance of savings can impact ROI and payback. Independent design reviews and reputable installers reduce that risk. Service and performance guarantees add further protection.

Policy and grant availability can change. Build projects that make commercial sense without subsidies where possible. Finance should fit your cash flow even if incentives shift.

Ensure your team can operate and maintain new technology. Training and supplier support are often included in proposals. Factor these into your total cost of ownership.

How to secure funding through Best Business Loans

Our role is to help you find suitable providers quickly and confidently. We use AI-driven matching to surface lenders and brokers that fit your project. You will then compare options, ask questions, and choose your route.

Submit a Quick Quote to outline your business and project. Share the asset type, supplier details, and estimated costs. Include any grants or incentives you plan to claim.

We introduce you to providers aligned with your sector and asset. Common sectors include manufacturing, logistics, retail, hospitality, healthcare, agriculture, and automotive. We also support renewable energy and green technology adopters across the UK.

Step-by-step process

1. Complete a Quick Quote with project details and funding amount.
2. Our system analyses your profile and shortlists suitable providers.
3. We introduce you to lenders or brokers who can assess your case.
4. Share documents, receive terms, and compare offers objectively.
5. Select the option that best fits your cash flow and risk profile.

Many asset finance decisions can be made quickly once documents are in. Complex projects may require technical validation and site surveys. Early preparation helps accelerate approvals.

If your project is part of wider plans, you might explore complementary options. These could include working capital, invoice finance, or small business loans. A blended approach can cover enabling works or non‑asset costs.

What a strong application looks like

• Clear project scope, supplier quotes, and expected savings or payback.
• Up-to-date financials and bank statements ready to share.
• Evidence of warranties, maintenance plans, and installer credentials.
• Realistic timelines and internal sponsor for delivery.

Adding a short business case can help lenders understand impact. Emphasise both energy and operational benefits. Include any risk mitigations and contingency plans.

When you are ready, click “Get Your Free Quick Quote Now” to begin. There is no obligation to proceed at any stage. Your details are handled securely and confidentially.

FAQs, practical tips, and key takeaways

What upgrades do lenders most commonly fund? LED lighting, solar PV, EVs, HVAC, refrigeration, heat pumps, and energy‑efficient machinery. These are mainstream assets with measurable savings. Controls and monitoring can be included where they enable savings.

How fast can I get a decision? Straightforward asset finance can be fast once documents are complete. Larger projects may require more diligence and may take longer. Early engagement with suppliers and finance partners helps.

Do I need a “green” supplier? Lenders value reputable installers with relevant sector experience. Accreditation, warranties, and performance guarantees are positive signals. Established track records can improve lender confidence.

What if I prefer not to own the asset?

Consider lease options, PPAs for onsite generation, or as-a-service models. These reduce upfront costs and can shift some performance risk. They also have accounting and contract implications to weigh carefully.

Are there tax advantages? Capital allowances and full expensing may apply to qualifying assets. The treatment varies by asset and entity type. Always seek professional tax advice before committing.

Will I get a better rate because it’s “green”? Some lenders offer incentives, but it is not guaranteed. The strongest driver of price is overall credit and asset risk. Sustainability‑linked structures can adjust margins based on KPI outcomes.

Checklist before you apply

• Confirm your goals, savings estimates, and payback period.
• Gather quotes, datasheets, and any grant approvals in progress.
• Prepare recent financials and bank statements.
• Decide whether you want to own the assets or use a PPA/lease.
• Plan for maintenance, training, and performance monitoring.

What are the biggest pitfalls to avoid? Overestimating savings and underestimating operational change are common issues. Choose credible suppliers and verify assumptions. Build in contingency to avoid surprises.

Can small businesses access green finance? Yes, provided the business meets lender criteria and can support repayments. Many SMEs fund sustainability upgrades via asset finance. Grants and incentives can improve affordability further.

Does Best Business Loans charge me a fee? It is free to submit a Quick Quote on our platform. If you proceed with a lender or broker, they will disclose any fees in their terms. You remain in control throughout the process.

Key takeaways

• Yes, green and sustainability finance is available to UK businesses for energy-efficient upgrades.
• Popular routes include green asset finance, sustainability-linked loans, and PPAs for onsite generation.
• Strong documentation, reputable suppliers, and verifiable savings improve approval odds.
• Grants and incentives can reduce net costs but should not be assumed.
• Best Business Loans helps you compare suitable providers quickly and confidently.

Ready to explore your options? Complete your Quick Quote for a fast eligibility check. Make smarter decisions with introductions to providers who understand your sector.

Compliance note: Information is for general guidance only and not financial advice. Finance is for business purposes only and subject to status, affordability, and lender terms. We do not guarantee acceptance, funding speed, or specific rates.

Updated: October 2025