Use Small Self Administered Scheme (SSAS) to gain business finance using your pension
Utilise your company’s pension pot to loan your own business funds. If you already have a SIPP or alternative pension scheme set up for your directors then you can set up a SSAS for your company and transfer the existing pension funds into it. These funds can then be borrowed by the company. The law will allow this as long as no more than 70% of the total pension pot is borrowed and the loan is secured against an asset worth no more than 50% of the loan to value.
One of the innovative ways the pension led business finance can be worked, is to utilise your company’s intellectual property as an asset that can be borrowed against.
Pension led business finance FAQ
How long are the loan terms for pension led business finance?
The loan is based on a commercial interest rate of around 6% and can last up to 10 years if required.
How long does it take to be approved for pension led business finance?
This sector of business finance is heavily regulated so arranging the loan does take longer than a lot of other forms of business loans. The usual time to arrange tends to be around 8 weeks.
How much does it cost?
The cost to set up pension led business finance would depend on your pension pot, but an average cost to set up would be around £6,000.
As I am loaning my own pension fund, can I not offer my company an interest free loan?
No, due to the regulation and HMRC rules the loan has to be based on a commercial interest rate which it typically around 6%. But the benefit of this is that the interest helps to get a good ROI on your pension pot. So if required you can increase the interest rate to further help your pension fund.
I can declare my business asset as intellectual property, what does this mean?
This means that the loan does not have to be secured against physical items. It can be secured against property, machinery, vehicles, etc. But the ability to secure the business loan against intellectual property means it can be secured against a variety of things including patents, trademarks, copyrights, branding & logos, databases, etc.
The value of these creative items would be ascertained by a professional valuations service.
Is my company pension pot safe?
The performance of your person pot depends on how successfully you repay the loan. If relayed correctly then the pension pot would achieve a better than average interest rate. If the business fails then the pensions can be lost. It is a risk and this form of business finance should be carefully considered before proceeding.
What do I need to be eligible for pension led business finance?
Personally you must be a director of the business, or be it’s owner. And the company pension pot must be worth over £80,000.
If all of this sounds good and you think pension led business finance is the product for you, please give us a call or email us to make contact.
Or if you feel that our pension led business finance is not suited to your needs please check out our other business finance services.