Problem addressed

Research conducted by JLL has found that the average cost to retrofit a home to EPC Grade C or above is £35,000. These upfront cost remains a prohibitive barrier to retrofit for many building owners with higher energy costs due to building inefficiencies often falling on tenants.

Overview of start-up

Factored empowers landlords to fund the upfront cost of retrofit using future rental income rights. Landlords can use factoring, a type of financial transaction, to sell future rental income in return for upfront cash. They can use these funds in a variety of ways to both improve living conditions for tenants and reduce their carbon footprint including retrofitting, refurbishing, and undergoing maintenance and repairs. Retrofitting can not only enhance a building’s energy efficiency and reduce carbon emissions but can also increase market value and property desirability.

Currently Factored provide finance for refurbishments as well as retrofits. Refurbishments can have positive social benefits and often involve some retrofit measures but are not necessarily as ambitious as full retrofit projects in terms of energy efficiency improvements. Factored therefore is planning to split its offering into two packages, one more sustainability focused for retrofit projects and one focused on wider property improvements. The sustainability focused package will have a cheaper rate than the general one.

What makes the start-up innovative?

Since factoring is not a loan, but is instead a sale of rents receivable, landlords can receive funding without incurring additional debt, avoiding financial liabilities to their balance sheet. Factored is also a non-credit financial product, meaning they can serve more landlords and at a faster pace than traditional finance. By factoring, landlords can finance with more flexibility than conventional bank loans or credit lines. Since the funding amount is directly correlated with monthly rent, landlords can access more capital as their rental income grows.

How the start-up has been designed to scale-up quickly

Factored is designed to plug in with other innovative retrofit startups, allowing them to fill the financing gap in their solutions. Through these partnerships, they are prepared to scale quickly. When landlords face challenges with traditional financing such as reaching their borrowing limit against their property value, age-related mortgage restrictions, or own unmortgageable properties they may face challenges with traditional financing. Factored can provide an alternative in these situations.