Access to finance.

It is one of the biggest concerns for all businesses, regardless of their size, turnover or length of operation. Having access to funds enables you to meet your overheads, deal with short term gaps in funding and supports your growth plans. It is paramount to success.

Since the credit crisis a decade ago, it has been increasingly difficult for businesses to access the finance they need to start-up, trade through adversity or grow. This is because banks – the traditional route to funding for many – have far more restrictions than they did ten years ago, are more risk averse and require bigger guarantees than the average business can provide. But, with necessity as the mother of invention, unsurprisingly we have seen a number of alternative funding routes come to the fore. In fact, you could argue that there has been a fundamental change to the way we view our corporate funding options.

However, lost in the midst of crowdfunding et al is a lesser known form of funding that is gradually becoming more popular. Pension led funding.

Pensions are principally your retirement nest egg; the money you have put aside to support you through your twilight years once you have decided to pack in the day job once and for all.

But, what few people realise is that these pensions can also be used to inject much needed capital into your business. If you have a self-invested personal pension (Sipp) or a small self-administered scheme, which is valued above £50,000, it can be used to invest for business purposes. And, if the pension doesn’t have sufficient funds it, or the business, can also obtain further funding to subsidise the investment amount needed.

Less onerous than a crowdfunding campaign, and less pressure than an investor pitch to a group of Angel Investors or Venture Capitalists, investing your pension allows you to retain complete control of your business.  All in all, a good idea, right?

Yes and no.

Normally, you need to be at least 55 before you can access your pension, but with pension led funding, you can access it at any age. And, even better, all shareholders can also access theirs which means a company with multiple owners can really stockpile their options

And once you have the finance, you can choose to invest is in a number of ways; purchasing commercial property, through a loan to the company (which will be repaid with interest) or by buying shares.

Of course, unlike taking a loan from a bank, you are not under the same pressure to re-pay the amount or to keep up with the repayment schedule – it is your money after all.

However, a word to the wise for those who think this is an ideal way to access ‘free money’.

Your pension is your retirement fund. It is the money you will rely on when you can no longer work and earn a wage. It is therefore imperative that you approach its investment in the same way that you would if you were to ask a third party to invest in your business.

The same rules should apply.

Determine the terms of investment. Decide on a repayment term, if relevant. Be realistic about interest repayments to make sure you are not out of pocket in the long term and – as with all investments – decide what a reasonable ROI looks like.

Investors look for businesses that are going to make their money work and return more to them than they invested in the first place. The higher the yield, the more attractive the proposition. And when deciding whether to invest your future livelihood, the same due diligence should be applied.

Are you looking to raise finance for your business? Are you overwhelmed with the options or finding it difficult to get the terms you need?  At Pegasus Corporate Finance, we work with businesses to access and package the most affordable and effective funding solutions for their needs.