Retirement doesn’t mean stopping.
In fact, many retirees are considering continuing working after they retire, and this may well include the formation of a business. It’s a challenge, but to some it is preferable to spending days relaxing.
This article isn’t about whether or not a retiree should start a business. Instead, we’re going to focus on how you can gain funds to help start a business in retirement.
This is probably one of the ‘fears’ that prevents people in this stage in their life from taking the plunge. However, it is possible to get some money in place to start and maintain a profitable business after retirement.
We’ll take a look at several of them.
Downsizing
A relatively new term, ‘downsizing’ allows you to release money in the sale of your property. Normally, downsizing means moving to a new, smaller property, and enjoying the equity you’ve released alongside that.
This is an interesting situation, because downsizing does indeed release funds through selling. However, you obviously have to live somewhere, so much of the downsizing profit may be spent on living expenses.
There may, however, be some money there afterwards that can be spent on pulling together your business. It is again a good idea to sit with a finance professional who will be able to tell you, realistically, what you can expect to gain from downsizing, and whether the amount of money will cover business expenses.
Spending the kids inheritance
This has become a growing trend in recent years. Rather than spend money on the future of their children,some retirees opt instead to spend it on themselves.
This has become more popular as people live longer. Money that has been saved up or has reaped returns on investment is simply used by the parents for other purchases. And these purchases are all about the parents, not the kids.
Using this money to start up a business is perhaps something new. The whole point of spending the inheritance is to enable a better standard of life. Many retirees take that money and go on a long holiday, for example. However, it is possible to use it to fund a business.
Whether that fits in well with a retiree’s own views on what they want from life is up to them. But if it is a large sum (and most parents now save up a lot for their future generations) it can be used very effectively to develop a business. For example, it is accepted wisdom that you shouldn’t start a business without ‘buffer money’. Buffer money is money you have ready for the first six months of the business.
Business can be challenging. If you are able to gather a good sum of money to protect against the ups and downs of business for those vital first few months, you’re in a great position. Of course, this option is appealing because you have more control over how the money is spent. If you just want to use a small amount of the money to fund one key aspect of starting a business, that is entirely up to you.
Equity release
Equity release is a situation where the borrower can take out an equity release contract, which releases money that is equal to up to 60% of the value of your home.
This can mean you can take on a potentially large amount of money very quickly. There are a couple of options in equity release that you can take advantage of. This is encapsulated in two products available to you, the borrower:
- The lifetime mortgage. This allows you to take money out against the value of the property.You have to be at least 55 years old to do this. One key aspect that makes this option an attractive one is the option to pay off all the interest, some or even none of the interest before the mortgage ceases. It ceases when you have to enter care, or you die. Another key aspect is you not having to take out the full amount. And you only pay interest on the amount you withdraw.
- The home reversion. This is a little more complicated than the lifetime mortgage. You can sell all or part of your property to a specialist home reversion company. You no longer own that whole or part of the property. However, you do have the right to remain in the property until you die or move onto long-term care.
If your business is dynamic
By ‘dynamic’ we mean looking like it’s going to grow quickly. If it is looking this way, then consider seeking investment.Bear in mind that not all investment runs into the hundreds of thousands. Some investors can pump money into a business for a small slice of profits, and they are much more likely to do this if you have an idea for a business that looks like it will grow quickly.
It’s worth considering seeking investment,simply because it allows you to have that early head start, without having to find money from more traditional lenders. Obviously it relies upon you having a strong idea that will make money for investors. But if you do, the power investment can bring is considerable.
Your choice
Many retirees look for funding from banks and their home value. Whatever you do, bear in mind that for the first six months of your business, you will have to work incredibly hard to make sure money is handled wisely, and your business gets your complete focus. Using some of the methods in this article to gain finance can help you on your way to running your ideal business in retirement.
