Pension Backed Funding

pension backed funding

What is pension backed funding?

Pension backed funding is by far the fastest growing source of business funding in the UK. It is also the lowest cost and lowest risk option compared to all other third party funders.

Pension backed funding has helped more than 30,000 business owners take control of their company finances, using money from their own accumulated pensions as a very compelling source of business funding.

Suitable for a variety of business needs, Pension backed funding arguably offers greater flexibility an independence than borrowing through the traditional channels and has the potential to grow the business owners’ pension alongside the funded business.

What can be funded via pension-led funding?

Pension backed funding can be used for most business purposes and is ideal for growing companies over 12 months old.

Who can use pension backed funding?

Pension backed finding is aimed at directors who have a pension (either singly or in a combination with other company directors) of at least £20,000.

Businesses from all sectors have used this form of funding particularly accountants, service-based businesses, tech, media, manufacturing and franchises.

Businesses from all sectors have used as stand-alone funding or in combination with other forms of finance. Often other lenders will look far more favourably on a clients who pension has already invested in the business.

What do you need to use pension backed funding?

The main requirement is to have a personal pension above £20,000 and be the director of a limited company. If you are presently a sole trader or in a partnership this type of facility is available. However, you will need to start trading via a limited company.

This form of finance allows you to invest your pension in your business with no requirements for personal guarantee and all the interest charges are paid to your pension rather than the bank.

What are the typical requirements, terms and conditions?

The director(s) existing pension(s) is/are combined into a new SSAS pension scheme where the directors become the Trustees.

A loan can be secured against an asset or the new pension scheme can purchase an asset and lease this back to the company.

Regular payments of capital and interest, at a commercial rate, must be made from the business back into the new pension scheme this type of funding is only used if the pension can make a commercial return.

As the funds are repaid to the new pension scheme it is possible to do repeat funding back to the business.

What are the main features when compared to traditional lenders?

Pension backed Funding Traditional Bank Funding
No Personal Guarantee. Must have a Personal Guarantee in most circumstances or interest charges will be very high.
No Charge on Private Property.  Typically the bank would have a charge over your private property.
All equity in the business retained. You may lose some of your equity.
Interest paid into Pension. Interest paid to bank and lost forever.
Repayments can often start after 11 months. Payments start immediately.
Facility cannot be withdrawn. An overdraft can be withdrawn or reduced without notice.
No need to report each month. The bank may ask you at anytime to start reporting to them monthly.
If your business fails the pension owns the assets. If your business fails the bank owns your business assets.
You can often borrow more every year.  The bank is less likely to want to lend you more funds each year.


What Do I Do Next?

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