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Pension-led funding gains momentum as source of alternative finance

One of the UK’s apparently best-kept financing secrets, pension-led funding, is gaining momentum as a significant funding source for the franchise sector. from specialists Clifton Asset Management recently secured funding for the Chorleywood franchise of Sevenoaks Sound and Vision. This is likely to set a trend, as many franchisees are able to find the core capital for initial set-up and to pay for the franchise licence, but then have a funding gap to provide the significant level of working capital required to support the marketing and development of their business.

While the banks are generally willing to finance the core capital, they often look for a collaborative partner or funding source that can fill the additional gap. Pension-led funding is an accessible source which avoids the need for personal guarantees and keeps franchisees in control of their own business.

This form of funding allows both franchisors and franchisees to access finance using accrued pension benefits which are held within a director-owned pension scheme. In the UK alone, more than £100bn currently resides in pension funds that could provide working capital for start-up and existing franchise businesses by using this alternative to traditional lending. 

According to’s Adam Tavener: ?Where franchisees are looking to bridge the funding gap, or even find core capital, pension-led funding is the ideal solution because they are backing their own franchise, while generating long-term pension growth at the same time. J & H Ltd, which bought the Sevenoaks Sound franchise, is a perfect example of this.

“This form of funding also provides an excellent opportunity for franchisors,” Tavener continued, either to develop their own organisations or, more importantly, as a recommendation to assist their franchisees to source start-up and development funding and we are talking to a number of franchisors with a view to supporting their franchisees.

James and Helen Gilbert, co-owners of J & H Ltd’s Sevenoaks Sound and Vision franchise said they were struggling with a large overdraft and problems with cashflow when they began to explore pension-led funding. For franchisees, this is a really good way of funding a business. As a franchisee you run your business within a larger entity, but you still have small business worries and risks,” Helen explained.

“My view is, if you have a pension pot that’s not working hard enough for you, why not use it to make life easier” You will hopefully get a good return on the money you have put away and you’re using it for your own business as opposed to keeping it somewhere which is feeding everyone else and not yourself. I feel we put money into pensions but, when it comes to retiring, we are often very restricted in what we can do with the funds. In using it to finance the business, I believe the money I worked hard to put away is now working for my benefit it certainly helps me sleep at night!”


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