Pension Led Funding (PLF) can be a great solution for businesses seeking funding that is less bureaucratic and more flexible than mainstream lenders, allowing them to become bankers to their own business. It isn’t suitable in all circumstances and several factors should be considered.
PLF may be a good solution provided that:
1. There is an owner-managed business that is viable and not insolvent. The Director’s pension funds are a valuable safety net, and protected in the event of insolvency, therefore adequate consideration needs to be taken before investing these in the Company.
2. The Director/s have pension funds, or the Company can make contributions of at least £100,000 to establish a PLF arrangement. The costs of establishing and operating a PLF arrangement are disproportionately high on small funds although they can be implemented from £50,000 although the cost/ benefit analysis should be carefully considered.
3. The Director/s are capable and comfortable in making their own decisions and assessing the risk vs reward of investing their pension funds in their business.