If you are looking at ways to fund your business, you may not be aware that you already hold the key. The chances are that, as a business owner, you have a pension or two on the go. It could be that these are from previous careers or it could be that they are private pensions that you have been investing in over the years. Either way, did you know that your pension could be the answer to the funds that you need?
Pension-led funding is an alternative way of funding your business. If this is something that you have yet to hear about then, read on. We’re going to show you how, as a company director, you can take control of your funding and drive your business forward.
What is pension-led funding?
Pension-led funding is an alternative way to access funds and invest in your business. It sees business owners borrowing money from their personal pension pot and then investing this into their business. The funds taken are repaid with interest and directors can access up to 65% of their pension.
Business owners are able to boost the funds that they can access by combining numerous pensions that they may hold. They are also able to include the pensions of business partners and a spouse. Pension-led funding gives you control over your finances and allows you to grow your business. As a complex financial tool though, you will need to work with an expert to see this set up correctly.
The traditional view of a pension is that it is there as our nest egg: something to make our retirement that more comfortable. It holds funds that are locked away and unable to be used. Pension-led funding changes this. It sees your pension being accessible now (even if you’re under 55) and being useable for business purposes.
This means that you have no need to seek funds from an outsider, like a bank or other lender. There are no personal guarantees to sign. There are no sales pitches. No presentations to venture capitalists. Instead, you are investing your funds and you are keeping complete control. Is there anything not to like so far?
How does pension-led funding work?
We are used to being told that we need to be 55 before we can access our pension pot. Pension-led funding utilises rules that you may not have been aware of. These allow you to access your pension whenever you want to and at any age. There is no need to wait until you reach 55. Provided that your business is a limited company, or is in the process of becoming one, this is how it works:
Borrow from yourself
Generally, you can access up as much as 65% of your total pensions. When you have your funds, some of the ways that these can be used include:
- A boost to cashflow
- Clearing debt
- Buying assets
- Acquiring a new business
- Purchasing a franchise
The money drawn out of your pension is then repaid. The maximum repayment term is 5 years. You will pay back the capital as well as any interest or premium that is due.
Grow your wealth
Pension-led funding benefits you. You have access to the funds needed to grow your business, but this form of financing also benefits your pension pot. The capital repayments and the interest all go back into your pension.
What are the benefits of pension-led funding?
If you explore this as a method of financing your business, there is one major advantage: the funds are already at your fingertips. There is no hunting around for investors, no need for the usual sycophantic show, and no need to be giving away any of your equity. Added to this, there is no need for endless applications and the all too familiar slow decision making from banks and other lenders. Some of the other benefits include:
- A chance to make use of your pension within HMRC rules
- Your pension pot only needs to have a minimum value of £100,000
- There is no upper limit to the value of your pension
- The ability to access under-utilised funds in a flexible manner
- You retain independence and are not answerable to a lender
- You have the chance to grow your business
- At the same time, you are also growing your pension
Is pension-led funding safe?
As a business owner, you are of course aware that risks exist in all walks of life. You have also shown that your attitude towards risk is different to that of the everyday person on the street. Just like any commercial borrowing, there are risks associated with pension-led funding, but these may not outweigh those that are associated with more traditional methods of borrowing.
What makes this funding method secure is that it operates within the rules laid down by HMRC. Also, you have the reassurance that the advisory team behind Pensionled Funding is FCA regulated. This means that it complies with an array of rules to ensure that customers are fully informed and safe.
Is pension-led funding the right option for me?
Pension-led funding can be the ideal solution for those who are looking to grow their business. As long as your business is a limited company, or in the process of becoming one, being able to access funds from your pension can allow you to grow at the pace that you want to.
To know if this is an option that will benefit you, you would need to take time talking to an expert in this field. With this being a complex offering, you need to be sure that you are fully informed before you make any decisions.
What’s the next step?
If you have seen the potential that pension-led funding has and how it could benefit you, you’re going to want to know what happens next. To find out exactly how you could stand to benefit from this funding option, all you need to do is get in touch. By clicking here, you can book a time with a pension-led funding expert who can explore how this option could work for you and your business.