An interesting discussion broke out in our office this week and it ended up with us talking about how fashions come and go and if you wait long enough even the worst items in your wardrobe will come back into fashion.
So how does this relate to business funding? Well, it’s simple, the “fashion” in the pension industry for the last few years has been in favour of SIPPs and the poor old SSAS has been discarded to the back of the wardrobe like the dodgy shirts we all had in the nineties!
So fast forward to now where we live in a world of tight credit, skinny jeans and difficulties that SMEs find in securing funding from the traditional sources such as banks etc. and the dear old SSAS is once again coming back into “fashion”. It should be on the radar of every owner-managed business when looking at funding options for their business in our opinion.
Anyone who is a subscriber to our newsletter will be aware of the tax position of pensions and all the new flexibilities that pension freedoms have brought to the market. Most business owners we speak to are aware of the opportunity for their pension to own commercial property, whether they use it for their business or merely buy it as an investment. However, what is generally not known is that there are other things that pensions can be used for. We have also spoken at length about the restrictions of annual allowance available to higher earners, however, a SSAS is an ideal alternative.
With a whiff of nostalgia in the air, you may also remember an advert from the dim and distant past for the “Bank that likes to say yes”? Well, things have changed a lot since then. But, what if you could be your own bank and therefore arrange your own loans?
SSAS pensions offer the ability for the pension scheme to provide funding for the Sponsoring Company. The “loanback” to the company can be used for virtually any purpose whether that be for financing or investment purposes!
The owners of the business decide on the suitability and the purpose of the loan. So, does this mean that the day of the “Bank that likes to say yes” is gone forever?
Before you embark on the onerous task of approaching lenders for backing, it's worth having a think about using the assets you already own to fund your business both now and in the future.
Anyway, before I get carried away with all this nostalgia and start playing Bruce Springsteen’s Born in the USA on a C90 cassette I would stress that this is not to be taken as financial advice and before looking at any proposal such as this you should seek appropriate independent financial advice.
If you are looking to discuss any of this in more detail (particularly Springsteen albums) please get in touch.