What is pension-led funding?

Pension Funding

Put simply, pension-led funding is a specialist form of business finance in which a business owner is, in effect, able to take out a loan for up to 65% of their pension value.

The pension savings are placed into a special type of arrangement known as a SIPP or SSAS. These are pensions that are substantially controlled by the individuals that own them. They have a much broader set of investment powers and can, amongst other things, invest in the business owner’s own business.

Typically this is done either by the pension granting a loan to the business, which must be secured, or by the pension purchasing an asset from the business and leasing it back or purchasing equity in the company.

Either way, the pension then becomes a significant investor in the business.

Pension-led funding can provide bespoke alternative funding options for businesses looking to raise capital for a variety of reasons.

Once the funds are introduced into your business you can use them in any appropriate way, whether to invest in new machinery or software, recruitment, a franchise business, growth or expansion, to provide working capital or as part of an exit strategy.

As well as being a very accessible and flexible form of business finance, another attractive feature of pension-led funding is that interest on the loan is paid to the pension fund, not a bank or other lender.

Wouldn’t you rather the interest goes back to your pension, than to anyone else?