Equipment Financing for Climate Companies: Empowering Sustainable Growth
by Tom Price, Senior Director of Originations at CSC Leasing
Climate tech companies are pivotal in advancing the global transition to a sustainable economy. By reducing carbon intensity, creating green jobs, and promoting essential technologies, they play a critical role in achieving climate targets. Because of the immense opportunity for innovation, investor interest has continued to grow. According to Statista, from 2018-2023, U.S. venture capital investment in climate tech exceeded $130B, and worldwide clean energy investments grew at an average rate of nearly 25% from 2021-2023 alone.
Young startups bear massive R&D and product development costs, and as these companies go to market and scale, the capital demands for maintaining growth and fulfilling commitments rise significantly. This can strain resources and lead to challenges like:
Shortened cash runway
Equity dilution
Constrained scalability
Equipment financing can be a powerful solution that allows climate tech companies to strategically acquire the necessary tools and technology while preserving equity, managing capital, and maintaining flexibility.
Case Study: How One Climate Tech Company Found a Solution to Growth
An innovative clean tech startup was on a mission to eliminate single-use plastics from the supply chain. The company had developed a sustainable packaging solution with proprietary materials but required significant investment in manufacturing equipment to scale production. The company was venture backed and had successfully raised a Series A round of capital, and it needed to preserve its equity for strategic initiatives. With only 14 months of cash runway, the company faced the challenge of acquiring necessary equipment without depleting its cash reserves or diluting shareholder value.
The company leveraged a non-dilutive financing solution with a sale leaseback on their standard extrusion production equipment. This enabled the company to scale its production capacity quickly without a hefty upfront investment, distributing the cost of the assets over time. They were able to retain their cash for essential growth activities, including product development, marketing efforts, and acquiring new customers.
What Can Leasing Do for You?
Leasing helps clean tech companies scale efficiently by providing non-dilutive financing to overcome CapEx barriers, preserve equity, and manage cash flow for growth-focused activities. This is particularly important in sectors like clean tech and renewable energy, where companies need to be able to attract future investors and maintain influence over strategic decisions. By opting for non-dilutive financing, climate companies can maximize shareholder value while retaining optionality for the future capitalization of the business. The benefits of leasing include:
1. Extending Cash Runway
For climate companies, extending cash runway is crucial for maintaining focus on core operations like R&D, customer acquisition, and scaling. By spreading payments over time, companies can better manage cash flow and allocate resources toward high-impact areas.
2. Lower Cost of Capital and Non-Dilutive Financing
Rather than spending valuable equity dollars or diluting ownership through additional fundraising rounds, companies can use equipment financing to acquire the assets needed to achieve growth milestones. This approach allows businesses to preserve equity for strategic initiatives, retain control, and position themselves for stronger valuations in future equity rounds.
3. Complementary Funding
Equipment financing can complement other funding sources, such as equity or debt, without imposing general, first, or secondary liens on the company’s balance sheet. This means it won’t interfere with existing credit lines or other financial commitments, allowing climate companies to layer financing tools and maximize enterprise value. By keeping equipment financing separate from other obligations, businesses can maintain flexibility, leaving room to leverage existing facilities without affecting the position of other lenders or limiting future funding opportunities.
4. Expedited scaling
One of the key advantages of leasing or financing equipment is the ability to add or upgrade assets as the business grows. As companies scale, their equipment needs may evolve, whether due to increased production demand, technological advancements, or regulatory changes. Equipment financing provides the flexibility to scale assets as and when needed, ensuring that the business remains nimble and able to support future growth.
By avoiding large capital expenditures on equipment that may become obsolete, climate companies can better position themselves for long-term success. This is especially critical in sectors where rapid innovation and environmental policies often necessitate frequent upgrades or replacements.
Summary:
Climate tech companies are transforming our world from an environmental, economic, and social perspective. Investing in and advancing climate tech is pivotal for creating a sustainable future. Equipment financing can be a powerful solution that allows innovative companies to scale quicker without diluting equity and cost effectively managing their capital for future growth.
To learn more about equipment financing for climate tech companies, visit cscleasing.com or email Tom at tprice@cscleasing.com
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🍿 The Lean Back
Learn about TELO’s electric trucks in the latest episode of Inevitable.
👩💻 Climate Jobs
For more open positions, check out the Job Openings space in the MCJ Collective member hub or the MCJ Job Board.
Materials Operations Supervisor at AMP Robotics (Commerce City, CO)
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👩💻 Events
🎄 MCJ New York: Holiday Happy Hour: Your city hosts Grace, Benny and Eliza put together one last gathering before the end of the year to come together, reflect on a year of climate wins, and re-energize for the fight ahead. (Dec 4)
🔮 MCJ + Climate People — Job Market Predictions For 2025: Climate People and MCJ are collaborating to present a monthly series of invaluable tips and tricks to advance your career working on climate. Our career advancement meetup offers a unique opportunity to learn from experts, build a strong community, and chart your path in the climate sector. Speaker and format to be announced soon! (Dec 11)
🌉 Climate Angels & Investors End of Year Celebration: Investing in climate in the Bay Area? Goodwin, Climate Capital, MCJ and Leo Banchik are closing out the year at Schroeder's in the Financial District and would love for you to join us. Light bites and drinks provided. There are limited spaces, so RSVP quickly to secure yours. (Dec 11)
👨💻 MCJ Climate + Product Meetup: Presenting the monthly climate and product meetup, to connect over product challenges in the climate space. The style will be lean coffee, but we will evolve and discover new ways to connect. (Dec 19)
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