In need of cash?
Business finance
Over 50 with large pension pot
Business finance
In these difficult times we all know that the traditional sources of finance, the High Street banks, are increasingly making borrowing more difficult. Prudence and the need to recoup the billions of pounds in losses are their driving forces. With house prices down (the principal security sought by banks) and with banks becoming risk adverse the amount of lending has reduced. In addition even if you are successful in getting an offer you will find that the margin charged by the banks has gone up! 4 to 5% over base rate (Bank of England or if the bank is sneaky the higher LIBOR rate) is likely to become standard with little room given for negotiation on arrangement fees. So what are your alternatives if the bank says no?
What about all the government’s contention that they will be forcing banks to lend?
Well the Enterprise Finance Guarantee (basically the small firm’s loan scheme which has been slightly tweaked) has been opened up to all businesses with a qualifying trade (most sectors will qualify) and a turnover of less than £25 million who are looking for valid additional financing. Loans will be up to £1 million for a period of up to 10 years.
The scheme is not an alternative to an overdraft or there to help failing businesses. A good strong business case is still required. It is basically a government guarantee of up to 75% of the loan to support lending for business growth and development in cases where a sound proposition may otherwise be declined due to a lack of security.
As you would expect there are snags. The key one is whether any business owner has a chargeable asset, for example property or endowment funds. For example, a 2 partner business (Mr A and Miss B) each own a 50% share in a company or partnership, if Mr A has a house solely in his name with no mortgage then this must be used as security for any loan first. Only if all other sources of loan finance are exhausted will the scheme come in to play. If the property had been jointly owned by Mr A and his wife Mrs A (who is not connected to the business) and Mrs A refused to allow the property to be used as security then this security cannot be used and the scheme may apply.
For a lot of small family run businesses the Enterprise Finance Guarantee initiative will be of little use. For those with genuine security issues and a viable business plan the scheme could be very useful. We have experience of obtaining financing for clients under the old small firm’s loan scheme as well as grants through SEEDA (South East England Development Agency) and we will be delighted to assist clients in their plans to obtain additional financing.
The reality as you can see is that for most businesses additional financing will be more difficult to obtain and this is unlikely to change in the foreseeable future. However there are many alternatives which are worth considering such as:
Hire purchase to acquire assets or refinance assets.
Finance leases to acquire assets or refinance assets.
Personal home remortgages.
Invoice discounting or factoring secured on the book debts.
Draw down on your pension.
Over 50 with large pension pot
The last one may not be obvious but if you have a large pension pot it is always worth investigating, particularly if you are 50 or more by 5th April 2010. At present, pension scheme permitting, if you turn 50 before 6th April 2010 you may be able to access your personal or company pension arrangements. From 6th April 2010, you will not be able to take benefits from any arrangement until you reach 55. There may also be other strategies which could be adopted if you have large pension pots.
If you are in need of finance please call us. We can assist you in putting together your business plans and we have a list of approved contacts we are happy to recommend who will be able to assist you in all the above areas of finance, from banking contacts through to pension advisers.
Please email Mark Friend or Andrew Grant or call on 01634-731390.
