Client Ecco Gelato featured in Business Insider

Over-55s are living longer, more active lives. In business, this is translating into more people at the end of their career who can’t resist the draw of new ventures.

Business Insider South West featured Andrew and Philippa Tarling in their recent article focusing on the new wave of older entrepreneurs, affectionately known as “silverpreneurs”.

To read the article in full click here.

A broker’s journey – Nic Franklin, Franklin Commercial Finance Ltd. (Synergy)

“It was a doddle”
This is how Nic Franklin, described his experience of brokering a deal for his client utilising Pension-led funding. 

The client’s  situation:
The client came to Nic looking for a £650k development loan to build commercial premises on a site they had already purchased using their own cash via their development company, GDV £1.1m.

 

They had secured a 15-year pre-let to the Coop & the intention was to sell the investment on completion.

Enter Nic:

 Nic had previously  worked with this client, an experienced developer, over a number of years, and once fully briefed,  carried out the usual due diligence, gathering the relevant information to assess the proposal. The wealth statements revealed that the directors both had significant private pension funds, totalling around £1.5m.

He approached four lenders for terms on a ‘traditional’ development loan basis and Clifton Asset Management (CAM) for terms for a Pension-led funding facility.

The lenders responses fell well below the client’s requirement, which would only be achieved if the directors were willing to give security over other properties in addition to the development site.

Nic contacted Tom Whitlock initially to discuss the Pension-led funding option, following which a telecon was arranged between Nic, the clients, their own IFA and Clifton adviser, Dave Bentley.  This was swiftly followed up by a face to face meeting, after which it became apparent that a PLF facility would be the best solution for the client.

Rationale as to why PLF was the right decision for the client:

  • They were able to raise the full amount required.
  • The client had total control of the funds – they were able to draw down the full amount when they wanted it & there was no requirement for a building surveyor to monitor the scheme as there would have been with a bank-led facility. 
  • The interest charges stayed “in-house” funding their pensions as opposed to a funder.

What happened next?

“Following that face to face meeting, Dave did all the running around, liaised directly with the clients & their IFA to arrange the facility whilst keeping me updated throughout the process.”

Nic only got involved during the negotiations on the fee structure, which were all conducted through Dave.

The client received all of the £650K of funding required.

Nic’s commission from CAM was agreed at just under 1.25% (£8085).

Final words from Nic

“I wouldn’t hesitate to recommend or use CAM / Pension-led funding in the future. Not only was it a good experience and great outcome for my clients, but the process and professionalism from Dave and the team at Clifton Asset Management was second to none.”

Would you dip into your pension pot to start a business?

This was the question that was asked in a recent “This is Money” feature.

The article focused on Pension-led funding, and how we are supporting entrepreneurs over 50  to fund SMEs.

 

Recent data from the Office for National Statistics showed that so-called olderpreneurs have set up more businesses than any other age demographic in the last decade.

Entrepreneurs over 50 have risen by more than 700,000 from 1.47 million in September 2008 to almost 2.2 million in December last year.

The article focused on two of our clients:

Click here to read the article in full

 

Averting catastrophe

Pension-led Funding Chairman, Adam Tavener, discusses concerns raised in a recent report commissioned by The All Party Parliamentary Group on Housing and Care for Older People.

We recently set out proposals to HM Treasury designed to get many more millennials into home ownership sooner, as well as getting them engaged with and enthused by pension savings.

I won’t go over all that again, our ideas around allowing first time buyers to save for a deposit within their pension savings have been covered extensively (if you want to read the document in full you can find it here).  They met with an exceptionally polarised response.  Basically pretty much everyone outside of the financial advisory business loved the idea and pretty much everyone within the industry (or anyone who commented, at least) hated it.  Making pensions relevant and useful to younger savers is, apparently, heresy.

Anyway, that squabble notwithstanding it was interesting to read the output from the All Party Parliamentary Group on Housing and Care for Older People.  The APPG have become increasingly concerned about the long term prospects for employed renters who never make it into home ownership.  Their recent report suggests that currently some six hundred thousand millennials face such a prospect.  Whilst long term renting isn’t necessarily a problem, affordability is.

The high cost of private rents means that, on average, a younger employed person is paying something like forty percent of their take home pay in rent, according to the APPG.  The immediate effect on this is, of course, to significantly reduce the amount they can put aside for other financial essentials, such as saving for a deposit or long term savings for retirement.

The bigger problems come later down the line, however.  Even if they do manage to amass a meaningful pension pot most individuals can expect their income to halve in retirement meaning that instead of paying forty percent over to the landlord they would now be paying eighty percent.  That’s real poverty and a route to homelessness.

The committee has stressed the urgency of building more affordable homes, recommending a target of twenty one thousand a year for the next twenty years.  Whilst I cannot disagree that this is part of the solution deposit affordability in a currently renting scenario still has a massive impact.

Pensions and property really are the cornerstones of most peoples long term financial security and thus using the generous tax breaks and employer contributions of one to help young people acquire the other makes perfect sense to me and for many young savers is probably the only realistic way out of the rental trap.  Yes, it is effectively a government subsidy on saving and property purchase but the net benefit to the economy, especially when contrasted with the APPG’s stark picture of future pensioner poverty and homelessness, is immense.

It is gratifying to see that, despite the (I suspect) somewhat self serving response of sections of the IFA community, some pretty big hitters have come out in support of our ideas, including the Secretary of State for Housing, the Association of Consulting Actuaries and Scottish Widows, amongst others.

If we are to counter the negativity and make this a real option for brightening the future prospects for millions of youngsters who, through absolutely no fault of their own are caught in a vicious cycle of ever increasing house prices and high rental costs then more influencers need to get behind the idea, and at the at the top of my list would be the ICAEW and the ACCA.  Come on guys…

Is unsecured finance as unsecured as you think?

In this blog, Tom Whitlock discusses potential risks often overlooked when taking out a personal guaranteed loan.

As the alternative commercial finance market continues to grow, every week there seems to be a new lender willing to offer finance on an unsecured basis. To the business owner, this leaves business assets unencumbered for other borrowing, and leaves no charges on their family home. This can be very attractive to many business owners, who can’t wait to sign on the dotted line for unsecured facilities.

There is one consideration many overlook when signing the paperwork, and that is the personal guarantee form. According to research conducted by an insurer, 60% of all respondents didn’t realise the full implications of signing a personal guarantee at the time of signing the form.

With a personal guarantee now being more or less expected with unsecured lending, I often wonder whether personally guaranteed unsecured facilities are truly…unsecured?

It’s true, there’s no charge taken on property (domestic or commercial) or business assets to secure these facilities. What happens though if, let’s say, the worst-case scenario happens, and the company goes under with a significant unsecured loan owing.

For the purpose of this example, let’s imagine a business owner must cease trading with a £150,000 unsecured loan outstanding.

The business owner probably doesn’t have £150,000 at hand, potentially a lot less with the average UK saver having just over £4,000 in savings, and 1 in 4 adults have no savings at all. Should the lender enforce the personal guarantee, the asset most likely present to either sell or be used to secure more borrowing is going to be the family home. This also assumes that the lender is willing to give the borrower time to raise the funds before going through the courts.

When choosing to trade as a limited company, the reason many do so is to create a clearly defined line between the business and their personal life. In my view, this renders the limited liability status of companies more or less pointless if borrowing is simply going to be personally secured, circumventing the limited liability status of the company in a worst-case scenario.

One option available to those not wishing to sign personal guarantees is to turn to Pension-led funding for a solution, where we can raise finance for business owners without a personal guarantee at all. Not only that, but if the worst does happen and the business folds, the pension will be one of the first in line to recoup its funds from the business.

Assuming the worst doesn’t happen, the business owner sees the capital and interest accruing back in their own pension funds along the way. These funds can then be used for retirement, investment or further rounds of business funding should it be required.

An option not considered by many, could you or your client benefit from exploring this option?