Midsummer Receives Loan for Production of Flexible Thin Film Solar Cells

The Swedish solar energy company Midsummer, a provider of equipment for cost-effective production of flexible thin film solar cells, receives a loan of 10 million SEK from the regional development agency Almi Företagspartner Stockholm Sörmland AB.

The Swedish solar energy company Midsummer, a provider of equipment for cost-effective production of flexible thin film solar cells, receives a loan of 10 million SEK from the regional development agency Almi Företagspartner Stockholm Sörmland AB.

The Swedish solar energy company Midsummer, a provider of equipment for cost-effective production of flexible thin film solar cells, receives a loan of 10 million SEK from the regional development agency Almi Företagspartner Stockholm Sörmland AB. The loan is meant to support Midsummer’s focus on production and sales of the DUO machines used for the production of flexible thin film solar cells.

Midsummer is a supplier of equipment for cost-effective production of flexible CIGS thin film solar cells. Midsummer’s turnkey production lines are compact, fully scalable and enable small-scale production of solar cells and modules.

Swedish regional development agency Almi Företagspartner AB has now decided to grant Midsummer a loan of 10 million SEK, part of which is guaranteed by the European Investment Fund, EIF. The purpose of the investment loan is to provide Midsummer with increased resources for research and development of machinery for the production of thin film solar cells, known as DUO machines.

“Our loan intends to provide opportunity for innovative companies to develop innovations and business ideas that provide growth and profitability,” says Fredrik Larsson, financial advisor, Almi Företagspartner Stockholm Sörmland AB.

“We sold a DUO system this spring to a foreign multinational company, which is yet another proof of the market potential for our system,” says Sven Lindström, CEO, Midsummer. “The DUO is a compact, fully automated system for production of CIGS solar cells. It is designed for high productivity, operational stability and superior material utilization.”

Midsummer’s customers are manufacturers of flexible thin film solar cells worldwide. An increasing number of companies see the benefits of the technology as it can be easily integrated in buildings (BIPV)—a rapidly growing segment.

Fredrik Larsson continues: “Through the funding we hope to provide Midsummer with the opportunity to develop and pursue its commercialization. It is hoped that Midsummer can become a model for other Swedish environmental technology companies. It will be interesting to follow the company on its journey.”

Midsummer is one of Sweden’s high-profile technology companies and has, among others, been named as one of Sweden’s hottest incubator companies (Almi). Midsummer has been named as one of Sweden’s hottest technology companies and also been repeatedly featured on the list of the nation’s fastest growing technology companies. Midsummer was the fastest growing cleantech company in the EMEA region in 2007-11 (Deloitte, Fast 500).

Almi Företagspartner AB’s vision is to create possibilities for all viable ideas and businesses to develop. Almi provides counseling, debt and equity in the enterprise all phases—from ideas to successful businesses. Almi Företagspartner AB is owned by the state.

The European Investment Fund, EIF supports the growth and development of small and medium enterprises. EIF’s founder members are the European Investment Bank (EIB), the Commission and private European financial institutions.

To Lease or Buy Equipment

As the economy continues to improve, more construction businesses are making capital investments to fuel their growth. When business owners and managers consider acquiring equipment, they often think of their payment option as a “lease versus buy” decision. In any economic environment, when preserving owner or shareholder capital is an important goal, financing equipment through a lease or loan will enable your business to preserve its cash.

Whether you finance equipment through a lease or loan, each has its advantages. In evaluating your options, it is important to look at each alternative to determine which will best balance usage, cash flow and your financial objectives. To help determine the most appropriate option, consider the following questions:

1. How long will the equipment be required?

Generally speaking, if the length of time the equipment is expected to be used is short term (36 months or less), leasing is likely the preferable option. Equipment expected to be used for longer than three years could be a candidate for a lease or a loan.

2. What is the monthly budget for the equipment?

As with any ongoing business expense, consider the monthly cost for a piece of equipment and how it fits into your budget. In general, leasing will provide lower monthly payments.

3. Will the equipment become obsolete while it is still needed for the operation?

Protection against obsolescence is one of the many benefits of equipment leasing because the risk of obsolescence is assumed by the lessor. Certain lease financing programs allow for technology upgrades and/or replacement within the term of the lease contract.

4. Is the equipment going to be used for a specific contract or can it be used for other projects?

Often, the business objective of equipment is for it to be revenue-producing. If a piece of equipment has limited use within a specific contract and won’t be used for other projects, it’s not ideal for it to be idle while you continue to make payments on it. It makes sense to stop the equipment expense when the income from it ceases, which you can do with a lease.

5. How much cash would be required upfront for a lease and for a loan?

Leasing can often provide 100 percent financing of the cost of the equipment, as well as the costs for transportation, delivery, installation set-up, testing and training, and other deferred costs (sales tax). Loans usually require a down payment and don’t include the other cost benefits. Ask how much of a down payment is needed and assess the availability and desirability of allocating company capital for that down payment.

6. Can the company use the depreciation or would the company get a greater benefit from expensing the lease payments?

The tax treatment of the financing arrangement is an important consideration in choosing between a lease and a loan. A loan provides you with the depreciation tax benefit; with a lease, the lessor owns the equipment and realizes the tax benefit, which is usually reflected in a lower monthly rent payment for your business, as well as the ability to expense the payment.

In many instances, if your business cannot use the tax benefit, it makes more sense to lease than to purchase through a loan because you can trade the depreciation to the lessor in exchange for better cash flow.

7. How will a working capital facility be impacted?

Many businesses have an aggregate line of credit through a bank that they can use for inventory purchases, improvements and other capital expenditures.

Depending on the lending covenants, it is often possible, as well as preferable, to preserve your bank working capital by leasing equipment through an equipment finance provider.

8. How flexible does your business want the financing terms to be?

A lease can provide greater flexibility because it can be structured for a variety of contingencies, whereas, with a loan, flexibility is subject to the lender’s rules.

If your business has continuing use for the equipment at lease termination, extended rentals, purchase options, trade-ups and return options are available. The lease term allows your business to match all expenses to the term of the equipment’s use, including income-tax expense, book expense and cash expense. Most importantly, as mentioned previously, the expense stops when the equipment is no longer required.

With the current low-interest-rate environment, now is a good time to finance equipment, in general, through a lease or loan. Again, the benefits of the type of financing is dependent on a number of variables and not necessarily the economics alone.

9. Do you anticipate the need for additional equipment under your financing agreement?

If your business is planning for growth, you can enter into a master lease that will allow you to acquire multiple pieces of equipment under multiple schedules with the same basic terms and conditions. This provides greater convenience and flexibility than a conditional loan contract, which must be renegotiated for additional equipment acquisitions.

10. Who can help me evaluate what’s best for my business?

Whether you finance equipment through a lease or loan, each has its advantages. When making the decision between a lease and a loan, it is highly recommended you consult with your accounting professional, as well as draw on the resources of your equipment financing provider, to enable you to secure the best possible terms for your lease and/or loan.

These are some of the key considerations that should go into the lease versus loan decision-making process. Find a lease/loan comparison and online tools.