The contracting UK economy shows no signs of turnaround in the near future, with the result that SME’s, small businesses and individuals find it increasingly difficult to obtain funding from banks and traditional sources of financing. This daunting situation has brought many businesses to a halt in terms of their expansion plans, and in some cases even threatened their short or medium-term survival.
However, just as any difficult economic cycle causes difficulties to arise for existing financial products and services, it also spurs the development of innovative financial products and services which are specifically designed to cater for the situation at hand.
Lewknor-based financial services firm City Corporation Limited, which specialises in structured applications for Exempt Property Unit Trusts (EPUTs) and Exempt Unit Trusts (EUTs), has done just this.
The innovative combination of bespoke financial structuring, combined with client’s pension funds, enables EPUTs and EUTs to be used for funding commercial property or other transactions. This innovative financial instrument (known as a Regeneration Bond) allows client’s to access and utilise their previously inaccessible pension funds, to fund or partially fund commercial transactions. It therefore enables clients to use their own existing funds to finance their commercial activities, or assists them to to satisfy the loan to value requirements that banks have imposed on prospective borrowers in the current economic climate.
According to Richard Ashken, Managing Director of Lewknor-based City Corporation Limited and Chairman of New Zealand based City Savings & Loans Limited “The Regeneration Bond represents our firms’ response to the difficult prevailing market conditions in the financial sector. As traditional sources of SME and small business funding had almost completely dried up , we structured a product which allows persons and businesses to access and use their own previously inaccessible capital”.
Because the Regeneration Bond enables people to access and utilise the funds traditionally locked-up within their pensions, they are able to self-fund their commercial projects entirely, or alternatively are able to partially fund their projects and therefore approach banks for partial financing on more favourable terms. Other than this, the use of a Regeneration Bond can also bring about tax-efficiency advantages for a client
Practicing what they preach, City Corporation Limited utilised their Regeneration Bond for two of their own commercial property development projects in the UK. This enabled them to partially fund their property developments with funds previous tied up in pensions, and thereafter obtain the balance of the funding on favourable terms from the banks.
Having refined their product not just through research, development and structuring – but also through personal professional application for their own projects – City Corporation Limited has now begun to provide access to the Regeneration Bond to SMEs and small businesses within the UK, as a City Corporation Limited professional service.
The current situation, according to Ashken, is that “The years of research taken to perfect the Regeneration Bond, and our personal experience in using it, means that we are able to structure it for most persons who have their own EPUTs or EUTs. In doing so, we assist clients to access and utilise their own funds for their property or other business projects. . In this time of austerity in Britain, we believe that helping others to help their own businesses – through gaining access to what is effectively their own money – is not just a commercial project, but also a way that we can do our bit to assist the UK SME and Small Business community in these trying times”.
