Updated: Carbon Trust takes on credit crunch with expanded energy-efficiency loans

The Carbon Trust has today moved to allay fears that tightening credit conditions could derail some firms' plans to invest in green equipment, announcing that it has doubled the maximum size of its interest-free energy-efficiency loans to £200,000, and increased its overall annual loans budget by 45 per cent to £31m.

The government-backed company said the move was in response to "difficult market conditions" and was designed to allow smaller businesses to implement energy-saving projects on a far greater scale than was possible under the previous limit.

Hugh Jones, solutions director at the Carbon Trust, said the move should make it easier for small and medium-sized businesses to fund relatively large-scale energy efficiency upgrades.

"We know that some companies found that the £100,000 limit made it hard for them to finance the more ambitious projects they wanted to invest in, such as large lighting installations, boilers projects, or multiple equipment purchases such as variable speed drives with compressors and heat recovery equipment," he said. "£200,000 loans pave the way for companies to take on such projects and significantly reduce both their carbon emissions and their energy bills."

Under the scheme, firms can apply for unsecured, interest-free loans that are repaid over a four-year period.

Previously, the loans were typically offered on a partial basis alongside loans from other sources. But with the credit market tightening in the wake of the recent financial crisis, the Carbon Trust said that the increased limit would make it easier for it to provide the bulk of the funding for energy-saving initiatives.

Paul Huggins, head of financial services at the Carbon Trust, said that the company would this week launch a marketing campaign to promote the expanded loans and help drive awareness of the offer among smaller businesses.

He added that the scheme had already enjoyed significant success with the number of companies taking advantage of the loans expanding year-on-year.

"We have seen a seven-fold increase in loan fund disbursement over the scheme's lifetime, with a 50 per cent increase in the number of loans last year alone compared with the previous year," he said. "We are confident that takeup of the scheme will continue to be strong, particularly at a time when energy prices are rising and credit conditions are getting tighter."

David Boomer, head of energy efficiency and climate change at employers' group the Institute of Directors, welcomed the news and urged firms to apply for the loans.

"Even at this time of economic uncertainty it is still vital that businesses continue to look for opportunities to invest in more energy-efficient equipment and thereby reduce their carbon emissions," he said. "The Institute of Directors would strongly encourage businesses to make use of this opportunity and to work closely with the Carbon Trust to improve their energy efficiency and reduce their energy costs."