Financing a BESS: How do you present the case to the bank?

When a company considers investing in an industrial battery energy storage system (BESS), the money often has to come from somewhere. Some pay from their own cash, but many will naturally speak with their bank about full or partial financing. That raises a practical question: how does such an investment look when it has to be explained to a credit department?

This article explains in general terms what a bank typically looks at for an investment of this kind, why a fixed contractual payment is easier to budget with than variable income, and how a physical asset can enter an ordinary financing discussion. The purpose is to give the finance function a realistic picture, not to promise a particular outcome. We cannot promise that a bank will say yes, or that a system can be financed on particular terms. That depends on the individual company and the bank.

What a bank typically looks at

A bank is a private business, and its core interest is to lend to projects with a low risk of loss. Whether and how much a company can borrow therefore depends on creditworthiness, that is, on the ability and willingness to repay loans and credit. A battery system case is assessed on the same basis when it reaches a credit committee.

In practice, the bank assesses the company against a familiar set of factors. A bank typically looks at the business plan, historical accounts, operating and liquidity budgets, and financial ratios, especially for profitability, liquidity, and solvency, and it will want credible evidence that the company can repay a loan. Applied to a BESS project, some points often recur:

• Size of the investment: How large is the acquisition (CAPEX), and how does it affect the balance sheet and debt?
• The ongoing payment: Which cash flows attach to the system, and how predictable are they?
• Ownership of the asset: Does the company own the physical system, and can that form part of the picture?
• Technical risk: What happens if the system does not perform as assumed?
• Insurance: Is the system insured against damage?
• Duration of the agreement: How long does the underlying agreement run, and does that fit a repayment profile?
• Default: What happens if a party does not meet its obligations?

None of these points is unique to batteries. They are what a lender generally wants to understand before deciding. It is also worth knowing that the bank values any security cautiously, typically at the amount that could be realised in a forced sale, and that a higher risk of non-repayment leads to requirements for more security or a higher interest rate.

A fixed payment is easier to budget with

A central feature of our model is that the customer receives a fixed contractual availability payment. The payment is calculated as the calculation basis (the contractual figure that sets the availability payment) divided by 72, that is, a fixed monthly payment, and if the agreement runs the full period without suspension, reduction, or termination, that corresponds to repayment over 72 months of the entire calculation basis excluding VAT. Purely as arithmetic, that equates to roughly 16.7% annual repayment of the calculation basis, but that describes how quickly the calculation basis is paid back, not an investment return.

For a finance function, the difference between fixed and variable income matters. A fixed, known monthly payment is easier to put into a budget than income that swings with the electricity market from month to month. A variable revenue share can deliver more in good periods, but it is harder to forecast, and a stable, known payment stream is simpler to align with a possible repayment profile.

That does not change the fact that access to financing is first and foremost linked to the company's own finances. Analyses of Danish business financing indicate that banks and savings banks are the preferred financing choice for most companies, and that refusals most often reflect weak financial ratios, where solvency and earnings weigh heavily in particular, while the most common barriers are requirements for security and the interest rate level. A predictable payment tied to the system can form part of the picture, but it does not replace the company's overall creditworthiness.

Ownership of a physical asset

Part of the case is that the customer buys and owns the physical system under the agreed payment and transfer terms. The purchase itself is structured as a 40% deposit on signing the agreement and the remaining 60% on technical completion of installation or at the latest on the commercial operation date. Software logic, algorithms, trading strategies, and optimisation models are not transferred to the customer; they remain with us and our partners. What the customer owns is the hardware.

Having a physical asset can be relevant in a financing discussion. Under Danish law, a company can pledge certain of its assets as part of ordinary financing. The owner of a business can, under section 47 c of the Registration of Property Act (tinglysningsloven), pledge the company's assets, a so-called enterprise pledge (virksomhedspant), which can cover eight exhaustive categories, including operating inventory and operating equipment. The categories appear directly in the statutory text, and the pledge is created by an indemnity bond or owner's mortgage deed and must be registered in the personal register (personbogen) to obtain protection. Whether and how a particular system enters such a structure depends on the individual agreement and should be clarified with the company's own advisers.

There is, however, an important precondition that follows from our agreement. The customer may pledge the system as part of ordinary financing, but should speak with us first, and any pledgee must respect our rights during the agreement period. In practice, that means a pledgee may not, without our written consent, require the system to be removed, sold, or transferred in a way that prevents the commercial optimisation to which we have the exclusive right during the period. Pledging is therefore possible, but it must be arranged so that it does not conflict with the agreement the payment rests on.

Technical risk, insurance, and what happens on default

A bank will also take an interest in what happens if something goes wrong, and here it is worth being precise about the risk allocation.

Ordinary market fluctuations do not change the customer's fixed payment. Extraordinary circumstances, for example force majeure, legislative changes, or regulatory orders, can affect the agreement proportionally under the specific terms, but that is not an automatic lapse of all obligations. Technical risk is allocated by cause: we are responsible for faults on our side and cover the cost of remedying them, while the customer bears responsibility for faults that stem from their own circumstances. Insurance is a fixed project requirement and a condition for commercial operation, and because the customer owns the system, the insurance is typically tied to the customer as owner. For a lender, it is relevant that the asset is covered against physical damage.

On default, it is important to be honest about where the customer's security lies. If we as a company do not meet the payment obligation, there is a simplified process with a written demand of 20 banking days, then a transition process, and ultimately the possibility that the customer brings our exclusive optimisation right to an end. In that situation, the customer retains the physical hardware. We do not automatically owe all remaining payments after a termination, unless otherwise agreed or required by mandatory law. The customer's security therefore lies in ownership of the system, not in a bank guarantee.

Limitations and assumptions

This article is general. We have deliberately kept it free of promises, because financing depends on circumstances we are not a party to. We cannot guarantee that a bank will finance a system, and we cannot say in advance at what interest rate or with what security requirements a particular company can borrow.

The assessment of a loan rests to a large degree on the company's overall circumstances and not only on the individual project. A strong business case for a battery system does not in itself make a strained balance sheet healthy. Conversely, a predictable payment and a physical asset can be useful elements in a dialogue that starts in good time. Coming to the bank early, with updated budgets and a clear picture of the finances, is described as a strength in the negotiation situation. The legal and tax details of any pledging should always be clarified with the company's own advisers.

ZynexGroup's approach to system assessment

Our role is to make the technical and commercial basis as clear as possible, so that the company itself can take the case on to its bank, auditor, or board. When we look at a facility, we look at grid connection, consumption profile, and the technical conditions on site, and we can explain how the payment model and ownership are structured.

We offer an actual 6-year payback guarantee on BESS systems. It is tied to the payment model itself and does not change the fact that external financing depends on the bank's own assessment. We can contribute a precise picture of the system and the agreement, but we do not step in as guarantor for a loan and provide no form of bank guarantee.

Overall perspective

A bank case for an industrial BESS system resembles in many ways any other investment case. The bank assesses whether the company can repay, and looks at the size of the investment, the payment stream, ownership of the asset, technical risk, insurance, the duration of the agreement, and default.

Two features of our model can make the conversation simpler. The payment is fixed and contractual and therefore easier to budget with than variable income, and the customer owns a physical asset that under Danish law can enter an ordinary financing discussion, provided that any pledgee respects our rights during the agreement period. Neither is a promise that financing will come through. That is decided by the bank and the company's own finances, and a case that is honest about precisely that stands strongest.

Assessing the potential for your facility

If you want a specific basis to take to the bank, we can have a data-based dialogue about your system. We typically look at your grid connection, your consumption profile, and your historical consumption data to make an initial assessment of whether there is a match, and to make the payment model and ownership clear.

You are welcome to contact us for an initial, non-binding dialogue.