Pension led funding

Pension Led Funding (PLF) is a financial services product offered in the United Kingdom (UK) that raises funds for businesses based upon the use of pension benefits accrued by owners or directors of the business they control. The money can then be used for the provision of a secured commercial loan , the purchase of commercial property, *the purchase of intellectual property assets, or the purchase of share capital (ordinary and redeemable preference shares).

Various corporate structures are eligible for this type of finance, including sole trader, partnership, limited liability partnership, limited company or franchise. The funding must be compliant with both financial regulations and Her Majesty’s Revenue and Customs (HMRC) prescriptions, and be planned so as to benefit both the company and the Pension Fund belonging to the business owner.

The two main sources of funds for PLF are Member-Directed Registered Pension Schemes, i.e. Self-Invested Personal Pensions (SIPP’s) and Small Self-Administered Schemes (SSAS’s). The schemes are typically devised by suitably-qualified and authorised financial advisers and implemented by experienced pension scheme administrators. Other professionals (i.e. chartered surveyors, solicitors and valuation specialists) may also be indirectly involved in the process.

The benefits of PLF claimed by providers are that such schemes provide access to commercial finance in circumstances when traditional lending options (such as bank loans or invoice discounting / factoring) to businesses is restricted and/or subject to potentially onerous terms. In PLF schemes, it is the owners of the business and funds who decide whether the risks are acceptable, not an outside party such as a bank. Thus, providers claim that PLF can assist business owners in achieving financial and operational independence, control and flexibility. According to independent research by Nesta (charity) and the University of Cambridge: "Since obtaining funding, 62 per cent have seen their profit grow, 59 per cent have increased turnover and 43 per cent have employed more people."

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