PENSION-LED business funding has the potential to provide an estimated £100bn of finance to small businesses in the UK, according to specialist funder Clifton Asset Management.
Bristol-based Clifton, which has recently opened in Glasgow and stages a free seminar at The Lighthouse tomorrow, says pension-led funding has helped more than 1200 SMEs and secured more than 10,000 jobs.
It cites Carlisle-based tyre-maker DMACK, which saw sales rocket four-fold overnight after winning a contract to supply the World Rally Championship.
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Clifton says: "It illustrates the importance of collaborative funding with banks, as... tighter capital rules are restricting the volume of bank loans made to SMEs. DMACK found itself in this position as it needed £150,000 to fund production, but its bank could only fund half this amount. Clifton therefore worked with the director of DMACK to arrange £75,000 of finance from his personal pension scheme, offset against the value of the intellectual property (IP)."
Neil Johnston, founder with his wife Suzanne of Edinburgh-based compliance adviser Lime Chocolate Consultancy, also used his pension to finance development of a new brand. He said: "My immediate thought was 'leave your pension fund alone'... but I knew it was sitting in a Sipp that might grow by 5% compound – not enough for a decent pension at 65. In reality, the biggest risk was leaving it where it was."
Mr Johnston was advised to value independently the IP held within the business. "I didn't think there was any IP in the business; I was wrong... all the elements added up to an IP valuation that totalled a lot more than I had expected and needed. The Sipp only acquired IP assets to the value of 40% of the fund, and we have been able to invest in marketing the business and developing the franchise model."