Lethenty Cabinetmakers Ltd

“Out of adversity comes opportunity,” American author, politician, inventor and statesman Ben Franklin famously said.

Cabinetmaker Graeme Winram would certainly agree after rebuilding his business from the ashes of a devastating fire which destroyed the bespoke kitchen and furniture designer’s workshop and much of his stock back in April 2016.

With around six months of work on the order book and the goodwill of the local Aberdeenshire community, Graeme set about transforming Lethenty Cabinetmakers and turned to his pension for finance for the second time to put the finishing touches to the job.

“We were overwhelmed with the support and help we received from our community. We were offered the use of storage buildings, workshops, vans and tools. One tree surgeon even gave us four large Elm trees,” Graeme remembers.

“The fire at Lethenty Mill was certainly a major setback for us but, rather than dwell on what we lost, we saw this as a fabulous opportunity to really transform our business for the better.”

Prior to the fire the need to pay off debt and purchase a briquette machine as a way of creating additional income and dealing with workshop waste, first switched Graeme onto the possibilities of Pension-led funding.

“I have had funding through my bank before but I was interested in pursuing Pension-led funding because it looked like I would be lending to myself and paying myself back which sounded a better option than going through a bank.

“I am also keen at some point in the future to purchase the building I am currently leasing and that would be a good vehicle for doing it because then the building becomes owned by the pension fund.”

With our help Graeme’s existing pension was transferred into a Small Self-Administered Scheme (SSAS) and used to provide a £50,000 loan to Lethenty Cabinetmakers. With guidance from the pension trustees, Graeme set the interest rate at 12% with a five-year capital repayment term.

Fast forward to autumn 2018 and Graeme and his team of four, who have been with him since the beginning, have rebuilt their workshop just north of Blackburn in an ex-fruit picker’s building at Cairntradlin.

But the conversion took longer than anticipated and Graeme turned to his pension again to fund a £35,000 shortfall and boost the company’s cashflow.

Graeme made a second loan to his business from his pension, again at an interest of 12% with a five-year capital repayment term – to himself.

Lethenty produce some of the country’s most innovative kitchens from local timbers, buying hardwood trees from farms and estates, with customers from some of the most prestigious houses in Aberdeenshire and the National Trust for Scotland.

“I just love the whole process,” said Graeme. “It’s so satisfying to me to see the whole process through from a rough heavy log in a farmer’s field to a shimmering surface of a beautifully made piece of special furniture. Local Elm in particular has a wonderful rich colour and swirling grain patterns.”

The luxury handmade kitchens produced by Lethenty cost on average between £30,000-£40,000, take four-six weeks to make, a week to varnish and a further week to install. Graeme and his team have recently refurbished several kitchens he fitted 20 years ago. “Hopefully these kitchens will be good for another 20 years of service.”

Does Graeme, who has also worked as a ski instructor, tree surgeon and furniture restorer, have any advice to help his customers look after their investment? “Use it, enjoy it, relax with it – don’t roller skate on it.”

Graeme said: “Cabinetmaking is really what we do. Making kitchens is the mainstay of the business, that is 80 per cent of our work, but we do like the creative challenge of making bespoke furniture.

“We will always miss our old workshop at Lethenty Mill but we are very proud of our new facilities at Cairntradlin. It feels like we’ve really turned a corner and we are now all set for the future. The new workshop is bright, clean and efficient and we are now in an ideal position for growth.”

Blue Scorpion

A business with the potential to generate £1 million a month of gross margin is an extremely attractive proposition.

And when that is based on a single figure percentage of market penetration, the potential is, to quote Tony Kensington, CFO, “incredible”.

Blue Scorpion provide payment card network security and segregation, helping businesses meet a set of Payment Card Industry standards, otherwise known as PCI. In simple language, that means providing security around customer card details when they make a payment.

A subsidiary company, EIT, provides installation and roll-out services to the retail sector, such as secure installations for Chip & PIN machines.

Tony, an accountant by profession, Nigel Tanner, CEO, who has a significant background in the card payments industry, and Nigel Storer, CCO, also with an extensive payments background, spotted a gap in the market to provide network security and segregation to small businesses.

Primarily this was aimed at those card present merchants who were receiving monthly fines for PCI non-compliance; however, acquirers are now realising the benefit of the Blue Scorpion solution even in their compliant merchant portfolios, and a broader remit is now being suggested to speak with all SME merchants to encourage network segregation generally.

The challenge of funding product development and the roll-out to customers is faced by all businesses but the potential payoff of working with the major banks meant getting the right financing in place was critical.

Private equity houses “liked the drive and passion of the people behind the business” but Blue Scorpion were looking for between £700,000-£1.5 million and not the £2.5 million-£3 million deals the private equity firms were suggesting they like to invest.

But a referral to the Alternative Business Funding portal led to an introduction to Pension-led funding and the opportunity to access the £750,000 sitting in their pension pots.

Accountant Tony was aware of the possibility of using a Self-Invested Personal Pension (SIPP) or a Small Self-Administered Scheme (SSAS) to invest in a business but it was the first he had heard of the company Pension-led funding.

We used a SSAS to put the funding in place in two ways, using a straightforward five-year loan and also a sale and leaseback of the intangible assets of the business.

Tony said: “We were able to use HMRC rules to value an asset that all businesses have but are not typically on the balance sheet and not typically considered when looking at security.

“We all thought it was a very innovative way of doing the finance and that really appealed to us.”

The partners used the injection of funds to buy their EIT subsidiary and recruit a sales director and tele-sales team for Blue Scorpion.

“We have 50,000 more opportunities than we would have otherwise. The potential of that is probably a £1/4 million of gross margin a month, absolutely huge,” Tony said.

“Our plan over the next three years is to have 150,000 monthly licences signed up. That would mean somewhere around £1 million a month of gross margin.

“We hope to get a business valuation of £50 million-£100 million in five years.”

Blue Scorpion are 12-18 months ahead of the rivals in a rapidly expanding market place, which includes the need educate traders and the general public. “They have absolutely no idea of how at risk, their card data can be. It’s a real problem,” said Nigel, their CEO.

That is a message that Blue Scorpion is taking into Europe, the Middle East, Africa and further afield into markets where Nigel, their CCO, has relationships with numerous payments institutions through former roles, such as Turkey where payments generally is very advanced. The US roll-out kicks off at the beginning of 2018.

Tony also has a message for business owners considering using their pension to fund their business growth.

“The attraction initially was that the pension funds were seen as dead money. Its use to us was a long way into the future. Through the PLF option we could actually make use of those funds now,” Tony said.

“Whilst we were putting them at risk, there was no more risk than a normal business risk.
We are actually going to make some use of that money to help grow and develop our business.

When we repay that money, we make bigger contributions and end up with a bigger pot. We are borrowing our own money – ‘The Bank of Us’.

It’s like a warm, reassuring feature. It might be borrowing at a touch higher than commercial rates, but it doesn’t matter because it is going back to ourselves.”

Looking to the future with Blue Scorpion and EIT, Tony said: “This opportunity is ours exploit fully, we are doing all of this with our own money. The opportunity PLF has given us is absolutely immense.”

Jigthings/Education Quizzes

The world of business finance can often seem puzzling but Colin King pieced together the solution with a little help from Pension-led funding.

His company Jigthings has taken America by storm, supplying jigsaw tables, boards, cases, frames and safes under the banner “keeping it all together”.

But the more successful the company has become, the greater the need for funds to buy stock to keep up with demand.

The need to keep the business well financed was heightened still further when co-directors Colin and his wife Lisa launched a second business, Education Quizzes, a subscription website for pupils who want to revise subjects they are studying at school.

“The global jigsaw market in total is worth £100 million,” Colin said. “In the UK alone the education market is worth £100 billion. We only need to capture a tiny, tiny portion of the market to have a good business.”

Which is just what they have with Jigthings which has captured the imagination across the pond. Turnover in America this year is expected to be somewhere between 1.3 and 1.6 million dollars with a further £150,000 in the UK, the majority of the business through Amazon.

Initial funding for Jigthings came from Colin’s own pension with £80,000 secured through Pension-led funding at a time when the company turnover was £250,000 in total on both sides of the Atlantic.

“The business would never have taken off without help from Alex [Pension-led funding consultant Alex Stavri],” said Colin.

“Were it not for him, Jigthings would have either folded or been in a much worse position than it is now.”

With profits unable to keep pace with growth, Colin approached Pension-led funding again and was introduced to fellow Alternative Business Funding portal partner Funding Circle, securing £120,000 finance.

A desire to invest the profits in the fledgling Education Quizzes dictated a further round of funding and Colin approached Pension-led funding again. On this occasion, he was introduced to the ABF’s Funding Finder engine.

Following the registration process, the ABF SME customer journey took Colin to a familiar place, helping to secure further finance from Funding Circle, increasing his total funding to £210,000.

Education Quizzes now has three full-time and four part-time staff in additional to Colin, with a further 20 teachers employed to provide content and is well on the way to successfully completing the profitability puzzle like Jigthings.

“When I needed initial funding Pension-led funding came up with a solution – easy and painless.”

For more visit
Jigthings website
Education Quizzes website

(Pension-led funding carries financial risk to the borrower like any other commercial credit facility)

PS Golf Ltd

Risk goes with the territory when running a business and pumping significant funding into the operation can take that to a new level.

Phil Smith was the last man standing, running the only remaining Nevada Bob golf store in England and mainland Europe, and believed after 23 years of selling clubs, balls, shoes and clothing, he knew a thing or two about his business.

The Nevada Bob’s Golf franchise, which had 60 stores across the continent by the year 2000, had retreated from its out of town presence, leaving just an online-only operation. However, Phil believed he possessed the experience to make a success of his Colchester store, PS Golf Ltd.

The problem was “the banks didn’t agree”, said Phil, 60. “My only option was to look for alternative sources of funding.”

That came from an unlikely source, himself. Phil had never heard of Pension-led funding or the option to borrow from your own pension when our letter dropped through his door, but he needed finance and decided to invest some of his pot into PS Golf – twice.

Phil said: “It was not something you really like to do but it was a choice of pulling the plug on the business or getting through difficult times.” Phil said he and partner Sue were taking a risk but how that has paid off.

With help from Pension-led funding, part of his existing pension was transferred to a Small Self-Administered Scheme (SSAS) and, first up, he secured a £70,000 loan against his stock. A further top up was consolidated with a loan of £75,000 loan the following year to be paid back over four-and-a-half years, although Phil intends to clear that early.

“The first deal was not enough, so we did it again,” he said.

“Over the last three years the business has started to turn around. In 2015 and 2016 there was a reasonable increase in trade. The industry had been suffering but was getting cleaner.

“In 2017 business has gone through the roof. Our performance is up 45 per cent on last year to date.”

The mild and relatively dry winter is one of the reasons for the stellar start to the year as well as a change of marketing strategy to focus on social media which has altered the profile and lowered the average age of his customers. PS Golf have responded by reviewing their product range.

The introduction of an in-store simulator has “dramatically increased” the number of clubs sold. Customers can now see the improvement a new set makes to their game without leaving the store, which is a conveniently placed just off the main A12 outside south of Colchester in Essex.

PS Golf also specialise in lady’s golf with a mezzanine floor dedicated to women’s equipment and clothing, boasting the second highest turnover of Lady’s Footjoy shoes in the South East.

Phil, who plays off a six handicap, said: “Using Pension-led funding meant I had an opportunity to carry on the business. It was down to myself and Sue to decide it was an opportunity worth taking.

“The process was fine, it did the job. It was quite clear how it was operating and what it was about. There is no reason why I would not recommend it to other business owners.”

(Pension-led funding carries financial risk to the borrower like any other commercial credit facility)

Ecco Gelato

When Chancellor George Osborne introduced Pension Freedoms in April 2015, Andrew and Philippa Tarling could not have imagined this would spark a new career as luxury ice cream makers.

But, with the help of Pension-led funding (PLF), two family windfalls and 25 years’ experience in the pub trade, that’s exactly what happened to the couple who have joined the new wave of olderpreneurs.

Both Andrew and Philippa had plenty of financial acumen, having left successful roles in the City with major independent banks before taking on a country pub in Horsington, Somerset.

Although successful, with the UK’s pub trade in decline the couple knew they would have to diversify and were looking to offer food. After reading about a publican in the North of England offering Gelato, Andrew sent Philippa on a ‘taster’ course at the UK headquarters of Carpigiani, the world’s largest supplier of gelato making machines.

No ordinary ice cream
For the uninitiated, gelato is ice cream made the Italian way, with only the best milk and ingredients and is lower fat than regular ice cream. For vegans, there’s sorbetto which, according to Philippa, tastes just as good as the milk-based version.

But making gelato comes at a price. “We thought we could just buy a machine for about £3,000, set it up in the pub and go from there. But, unsurprisingly, it wasn’t that simple”, Andrew explains. It was clear there was a lot more involved in making top quality ice cream and it was going to need the best machinery and stand-alone premises. The costs quickly escalated.

No ordinary funding
The Tarlings saw their pensions as an opportunity to expand their horizons but, rather than simply cash them in, they sought an approach. They met with Clifton Asset Management and recognised Pension-led funding (PLF) as the solution.

Philippa’s pension plan – a defined benefits scheme that had closed in 1996 – had previously been valued at nearly £90,000. But in the subsequent 14 months, that value had almost doubled, thanks to the collapse in interest rates. According to Philippa: “That made the decision to set up the gelato business easier, because we could buy more, better quality equipment to allow us to produce higher volumes.”

The pension pot was placed in a SSAS set up by Clifton which allowed the Tarlings to back their own business. Their pension scheme loaned them £75,000 secured against the gelato machinery, along with £40,000 in cash from two windfalls. The Tarlings decided on an interest rate of 12% so that the loan could be paid back to the pension fund more quickly, and experience further growth. “It’s all about the money in the end, and with the money being made by the business only being owed back to our own pension fund it’s a perfect circle”, says Andrew.

The cherry on top
“The inheritance money was on deposit at 2.25% and my pension was going to give me about £100 a week and that doesn’t get you very far. It was clear to us as ageing professionals that PLF would work and Clifton were very efficient in the way they sorted it out”, says Philippa.

Andrew adds: “The state won’t be giving us anything”, Andrew adds. “The goalposts will continue to move because they will have to. We’ve seen our parents go through it and they’ve had the best of it. Baby Boomers won’t have the same support that they had and it won’t be there for our children either.”

The Tarling’s retirement plans are ambitious. While Andrews continues to run the pub, Philippa is building a gelato empire –In just its first month, Ecco Gelato has proved a huge hit in the affluent Dorset town of Sherborne, with takings already well into the thousands, and the target is three or four outlets. “With a gross margin of more than 80% on turnover, we’re looking at strong returns on our investment. We have confidence in our business and we plan to get up to three or four outlets and keep the pub as a place to live.”

Most importantly, the whole family is set to benefit according to Andrew. “Our business will grow our pension and the children’s inheritance money faster than almost any other investment. Once we’ve made provision for the kids, we’d like to buy a couple of nice cars and holiday a lot. That may sound a bit selfish, but when you do what we do for a living 24 hours a day, I think we deserve a break.”