Tesla Motors Loan From Deutsche Bank Finances Vehicle Leasing

• September 8, 2016
• By Pete Nisbet
• 0

A Tesla Motors loan from Deutsche Bank for borrowing of up to $300 million will ease Tesla’s future borrowing needs. Tesla manufactures electric cars, and the funds are to finance its electric vehicle leasing program. This is just one aspect of Tesla’s drive to strengthen the company’s financial position.

According to Tesla’s filing with the U.S. Securities and Exchange Commission, the loan has ‘significantly reduced’ the amount of capital the firm would have to raise on the public market in order to finance the vehicle leasing program.

Tesla Motors Loan Reduces Future Borrowing

Tesla had announced last week its intention of raising finance to fund the new Model 3 mass market electric car and its Gigafactory battery plant. The amount needed will have been reduced due to this credit line. According to the SEC filing, the $300 million credit line is open until August 31, 2017. The full amount must be repaid by September 20, 2018. The interest rate looks around the 2% mark.

Tesla has had a significant cash burn of $860 million over the past year.  It needs extra cash to fund the new $35,000 Model 3, due for release next year. The Gigafactory battery plant in Nevada, still to be finished, is also a huge cash drain. Add to that Tesla’s planned acquisition of SolarCity and the company’s financial needs are greater than it would have liked.

Tesla and SolarCity Costs

SolarCity will cost Tesla around $2.6 billion, and the solar panel company itself is in need of cash. This acquisition will enable Tesla to use solar panels on the roof of the cars to recharge the batteries while the car is running. It is likely an important aspect in Tesla’s plans for electric car development. It does mean, however, that Tesla must press on with its fundraising efforts.

Tesla has stated that it closed the second quarter ending June 30 with $3.25 billion in cash. However, it repaid $678 on a revolving line of credit in July, and planned to redeem 2018 convertible notes of $422 million. More will have to be spent on securities. The £300 million will help the company by avoiding excessive borrowing for the vehicle leasing program.