SMEs Increasingly Using Pensions To Fund Growth

PoundsPension-led funding (PLF) is being used by an increasing amount of SMEs for the purposes of financing growth and expansion.

According to a recent report by Nesta and Cambridge University, £25 million of funding was secured by SMEs using PLF last year. The average amount raised via the pension-led funding route was just over £70,000, though this figure was significantly higher in some instances.

Business owners are often attracted to PLF as they like the idea of having greater control over their own savings. Indeed, in a survey by Nesta, 66% of SME bosses said that an “important” factor in choosing PLF was being able to utilise their own pensions, whilst 73% said that they preferred having control over their business finances rather than being forced to turn to traditional landers.

Richard Cunningham, director at Cheshire-based Enterprise Tax Centre, which runs smepensionfunding.co.uk, comments in BDaily:

“These figures back up the trend we have seen among North West SME business owners in the last 12 months. We have seen a doubling in the number of enquiries we have received from regional SMEs wishing to consider pension-led funding as a way of accelerating their business growth.

“Business owners are growing in confidence because of the improved economic climate, but remain deeply frustrated by the traditional lenders.

“Entrepreneurs are not naturally inclined to tread water and wait for the banks to open their doors and that is one of the main reasons why we are speaking to a growing number of businesses keen to find out more about pension-led funding.”

SMEs can access PLF by transferring their pension into a self-invested personal pension (SIPP) or a small self-administered scheme (SSAS). The pension is then used to buy assets, or loans money to the company secured against retirement funds.

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