Spring Free EV debuts tax equity product for commercial fleets

Fintech Spring Free EV is gearing up to launch a product that will allow fleet managers to access residual capital funding and take advantage of EV tax credits as they grow their fleets, regardless of tax status.  

The Residual Capital Product was derived from the solar and wind industries and allows fleet operators to take advantage of the Internal Revenue Service’s Commercial Clean Vehicle Credit, or 45W, regardless of their tax status, Spring Free EV Chief Executive Sunil Paul told Auto Finance News.  

The 45W tax credit allows businesses and tax-exempt organizations that buy qualified commercial clean vehicles a tax credit of up to $40,000, according to the IRS. 

“We think this is going to be especially applicable to larger fleets, basically anyone who is not able to take advantage of the 45W tax credit because they basically don’t have enough tax liability,” Paul said.  

“Companies that are deploying very large numbers of electric vehicles are either running out of tax capacity to take the credits or don’t have much tax capacity in the first place because they might have depreciation expenses, they might have R&D tax credits, they might have losses from prior activity,” he said. 

In a traditional loan or lease, the consumer or business is required to provide a downpayment, also known as residual capital, to offset the financing expense for the lender.  

With the residual capital product, Spring Free connects fleet managers with investors who provide a portion — or, in some cases, all — of that downpayment in the form of a low-interest loan and take a security interest at the bottom of the capital stack, Paul said. That allows investors and fleet managers to reap the benefits of the 45W tax credit.

Spring Free has been using the Residual Capital Product to pay for its own fleet acquisition through four funding rounds and is on its fifth round, Paul said.  

“The pipeline of demand for investors is quite large — well over $100 million deep,” he said.

The Residual Capital Product has “made us very capital efficient, and we want to bring that to the rest of the automotive finance world,” Paul said.