Friday, 15 July 2011

Look for cash closer to home

Shropshire businesses who need a vital cash injection could find the answer is closer to home than they think.

Stuart Haynes, from our commercial team, said despite the banks relaxing their rules, borrowing was still not an easy option for many companies. "So if you need to expand your business or need cash to invest in new equipment, you may find you have to consider alternative options."

Stuart said one possibility could be setting up a pension known as a Small Self-Administered Scheme (SSAS).

"They are designed specifically for small to medium-sized companies with a small number of director/shareholders - or even just one if you're a sole trader. This kind of scheme is allowed to lend to businesses where the pension fund holder is a director/shareholder, which is different from other types of pension fund."

Stuart said there was no specific limit on how much an SSAS could lend your company, but it couldn't lend more than 50% of its net assets. "Your company would have to pay a commercial rate of interest on the loan, but of course the money will go straight from your business into your own pension account, so it's effectively costing you nothing."

He said an existing pension fund could be transferred into an SSAS and your company could immediately access a loan worth up to 50% of what the fund was worth.

"There are many companies who can set up a fund like this for you, but it's vital to take professional advice in order to avoid any pitfalls and mistakes."