Age may be compromising the employment prospects for older people with the number of over 50’s finding it increasingly difficult to find full-time work.
However, the sheer number of baby-boomers now approaching retirement age with the potential to embark upon a second career and do something that they always wanted to do, means that older entrepreneurs are proving to be a big driver in the growth of self-employment.
A big reason for this is that people in this situation often find themselves with both the ambition and the financial firepower to start up their own business or purchase a franchise: buying into a ready-made business.
Here we explore the various options for budding ‘later life’ entrepreneurs to fund a new venture.
- Pension freedoms
Transfer valuations on final-salary schemes have soared in recent years. Moreover, pension freedoms have made it possible to access retirement funds from the age of 55, meaning it is now possible to access valuable lump sums, or even borrow against the value of a pension to raise the capital that could be used to fund a new business venture.
- Redundancy payments
Some older people that have been made redundant are using their redundancy payments to start consultancies, giving them a chance to both use their knowledge and expertise in a productive way as well as create their own flexible working option in their ‘retirement’.
This point in life is when older people typically inherit assets from their parents and family. This gives people a great opportunity to start a new business and fulfil one’s ambitions.
- Become a buy-to-let landlord
At a time of historically low interest rates on savings, many older people are turning to property investment with the confidence that they understand the property market better than any other form of investment. According to recent research by the London School of Economics for the Council of Mortgage Lenders, just over 60 per cent of buy-to-let landlords in England and Wales are aged over 55, compared to just 24 per cent twelve years ago.
- Get help from the government
A Start Up Loan is a government-backed personal loan that can provide £500-£25,000 for individuals looking to start or grow a business in the UK.
With an interest rate fixed at 6 per cent per annum, applicants are required to submit a business plan, pass credit and eligibility checks and be starting a company or be in control of one that has been trading for less than 24 months (this can include a franchise operation).
- Equity release
‘Equity’ in your home is the difference between the value of your home and the size of any outstanding mortgage secured against it. For example, if your house is valued at £250,000 and your interest-only mortgage shortfall is £50,000 – then you have £200,000 of equity in your home.
Equity release plans allow homeowners, aged over 55, to tap into some of the money tied up in their homes. The money is tax-free and available to spend on whatever you wish.
One of the great features of equity release is that you don’t have to prove your income or pass any affordability checks to take out a plan.
While you can choose to make repayments, many people decide not to, and the amount borrowed plus the interest built-up is repaid following your death or move into long term care. This option will reduce the value of your estate but could be an ideal way to fund a new business venture as you don’t have to worry about making repayments, which can reduce your monthly income.
If you are considering equity release to fund your new business venture, then you need to speak to a specialist adviser – such as the experts at Equity Release Supermarket. With access to the whole of the market, your adviser can find a plan tailored for you and explain the pros and con of using equity release for a potential business start-up.