Cost is the reason smaller businesses give most often for not doing more on net zero. Yet few use the grants and loans on offer. A project is easier to fund when it comes with a measured starting point and a clear case for each measure.
Finance exists, but few firms use it
In the British Business Bank's 2025 Net Zero Business Census, a survey of 1,783 small and medium-sized enterprises (SMEs), 66% named high costs as a barrier, the most common answer. Only 7% had used grants for net zero, 2% had used loans, and 3% had talked to their lender about it.
Manufacturers in the same census said the support they wanted most was tax incentives (45%) and grants or funding (39%). Researchers at the University of Bath studied the market for SME decarbonisation in 2025. They found that UK SMEs are strongly reluctant to borrow, even when cheaper loans are available, and that this holds back larger measures.
Bank of Scotland's report on UK manufacturing SMEs points the same way. Of the 128 manufacturers it surveyed in 2021, 30% wanted more support from policymakers through incentives, loans or grants. In its follow-up survey of 117 manufacturers in 2022, 79% said the events behind rising energy costs had set back their progress.
Waiting for cash has a cost of its own. If a measure pays for itself within the loan term, borrowing brings the saving forward rather than putting it off for a year or two.
Where the money can come from
Most projects are paid for from a mix of sources. Match the source to the size and payback of the project, and ask your bank early what green or energy efficiency lending it offers.
- Route
- Your own cash
- Best for
- Quick wins such as leak repairs, controls and insulation
- Route
- Capital allowances
- Best for
- Qualifying plant and machinery
- Route
- Green loans, asset finance
- Best for
- Owned equipment: motors, drives, boilers, compressors
- Route
- Leasing, supplier finance
- Best for
- Solar, lighting and kit sold on pay-as-you-save terms
- Route
- Grants
- Best for
- Measures covered by a scheme that is open now
- Route
- Energy service companies
- Best for
- Projects where a provider invests and is paid from the savings
| Route | Best for |
|---|---|
| Your own cash | Quick wins such as leak repairs, controls and insulation |
| Capital allowances | Qualifying plant and machinery |
| Green loans, asset finance | Owned equipment: motors, drives, boilers, compressors |
| Leasing, supplier finance | Solar, lighting and kit sold on pay-as-you-save terms |
| Grants | Measures covered by a scheme that is open now |
| Energy service companies | Projects where a provider invests and is paid from the savings |
Capital allowances, such as the Annual Investment Allowance and full expensing, reduce the tax cost of qualifying equipment. Which one applies depends on your business and what you buy, so confirm it with your accountant against HMRC's current guidance.
Grant schemes change often and differ across the UK. In England, ask your local Growth Hub; in Scotland, Business Energy Scotland; in Wales, Business Wales; and in Northern Ireland, Invest NI. Check the rules before you order anything, because some grants cannot be claimed after the purchase.
Compare on lifetime cost, not purchase price
The cheapest equipment to buy is rarely the cheapest to own. For motors, compressors and boilers, the energy they use over their life usually costs far more than the equipment. Compare options on purchase, installation, energy, maintenance and disposal together.
Simple payback is the easiest test to explain: the project cost divided by the saving a year. A lender will also want to see the yearly saving set against the loan repayments, so you can show the project pays its own way.
Count the cost of advice as part of the project. An energy audit or an engineer's survey has a price, and a weak survey can point you to the wrong measure.
What a lender needs to see
Banks, grant officers and service companies ask much the same questions. A project that answers them before they are asked moves faster.
- RecordsTwelve months of electricity bills, fuel purchases and production figures, so the saving can be measured against a real starting point.
- AuditA survey by an energy auditor or engineer naming the measures, their cost and the energy each one saves.
- ProposalQuotations, the saving in pounds a year, simple payback, and the emissions the project avoids, with the conversion factor used.
- FinanceRecent accounts and the mix you plan to use: your own funds, a loan, an allowance and any grant.
- ProofAfter installation, the same records again, so the saving is shown and the next project is easier to fund.
Record the baseline before anything is installed. Once the new equipment is running, you can no longer measure how the old equipment performed. The same records serve your customers too: a buyer asking for your emissions draws on the same bills as a lender, so build the figures once and keep them up to date.
How ESGen helps
ESGen is not a lender, an energy auditor or an installer, and we do not arrange finance or apply for grants on your behalf. We work on the numbers behind the application.
The platform builds your Scope 1 and 2 figures from your bills, using the conversion factors published by the Department for Energy Security and Net Zero (DESNZ). Each bill sits in the evidence library and each calculation in a log, so the before-and-after figures for a project can be traced to their source. Our team can help you prepare the energy and emissions figures a lender, auditor or customer asks for. See carbon assessment.
To see how a year of your bills becomes a baseline a lender can follow, book a demo.
Sources
- British Business Bank, SMEs and Net Zero 2025: UK Net Zero Business Census report, survey of 1,783 SMEs
- Hampton, Burtnik and Russell, SME decarbonisation in the UK: emerging market trends and their implications for government, University of Bath, 2025
- Bank of Scotland, UK Manufacturing: From Now to Net Zero, surveys of 128 UK manufacturing SMEs (April to May 2021) and 117 (2022)
- HMRC, capital allowances guidance
This article is general information, not legal or financial advice. Rules change, so check the current guidance before you rely on a threshold or a date.
