The fragility of supply chains across all sectors has been a hot topic in recent months, generating newspaper headlines and sparking renewed focus on domestic production capabilities. This trend, coupled with Government targets for a greener future, represents an opportunity for indoor growers to expand and modernise in order to meet this demand. Some crops such as strawberries, herbs and ornamental plants already lend themselves to year-round cultivation under glass, yet such business development requires investment and it can often be tricky to navigate the conversation with traditional lenders who may view horticulture’s seasonality as a more risky prospect.
The supplemental lighting chosen can have a huge impact on the success of the business, both by helping to optimise potential yields and by minimising operational overheads such as maintenance and energy consumption. More growers today are looking to transition from energy-hungry HPS lighting to more efficient horticultural LED solutions that offer tailored lighting spectra and longer useful lifespans. Renewing lighting or fitting out a brand new facility with the latest LEDs represents a significant investment but there are ways to make it more affordable — or even removing it completely from the balance sheet.
Originating as a start-up within the walls of General Electric, GE Current, a Daintree company, has long understood the importance of supporting customers, not only from a product and technology perspective, but also by helping them discover the options available in terms of finance.
With greater focus on “purpose-driven” financing, some lenders now ring-fence investment for projects that contribute towards sustainability goals. Government subsidies and grants are also becoming available to drive homegrown innovation and level up the domestic farming market. Growing locally using highly efficient LEDs rather than HPS lighting and avoiding the food miles from international imports that would otherwise generate a larger carbon footprint often qualify for such funding support.
Classic loan arrangements are still common as they often offer the lowest total lifetime cost, with higher repayments over a shorter period of time. With this model, Current’s Arize® LED lighting and any other infrastructure (for example, a Daintree Horticulture wireless lighting control and environmental monitoring system) sit on the balance sheet as a capital asset, with the loan appearing as a liability.
However, if businesses want to use Capex to cover other major purchases, it is also possible to think creatively and remove the investment from the balance sheet altogether through a ‘Lighting as a Service’ (LaaS) agreement.
Flexible financial support
With LaaS, businesses only pay for the light delivered, with levels set for daily light integral, intensity or photoperiod, along with agreement on the most appropriate spectrum for the crop. The management of the lighting — installation, maintenance, etc — is then taken on by Current (or one of its partners) and appears as a monthly operational cost over a longer period than might be seen with a traditional loan model.
This type of financing removes the headache of asset management and accounting, while preserving cash flow and ensuring businesses only pay for what they need. In some cases, for example when replacing HPS lights with new LED fixtures, businesses can even cover the repayments from the monthly energy savings generated by the newer, more energy-efficient technology.
Ultimately, no matter how growers want to expand, modernise or improve operations, there is more flexibility than ever before in terms of financial support. Businesses should challenge suppliers to help find the right financial solution to enable them to focus on what truly matters... growth.