3 Alternative Ways People Over 50 Can Finance a Startup

According to 2017 UK Office of National Statistics, a fifth of new businesses in Britain have over 55s at the helm.

Some entrepreneurs in this age group have substantial savings to launch startups, while others have generous redundancy payments or lump sums released thanks to pension freedom.

If you fancy starting a firm but none of these options apply, hope springs eternal — here are three alternative ways over 50s can finance a startup.

Middle aged people have many means of funding a business
Photo Credit: Joan Nova/Flickr

1. Start Up Loan

When you want to borrow between £500 and £25,000, a Start Up Loan backed by the UK Government is a good choice.

You’ll need to be running a company that’s been trading for less than 24 months, pass credit and eligibility checks and submit a solid business plan to qualify.

But there are no set up or early repayment fees, annual interest is fixed at just six per cent and you’ll benefit from 12 months of free business mentoring.

The scheme has supported more than 55,000 businesses so far and awarded more than £400 million of loans, so there’s an established track record of success.

If you’re receiving benefits like universal credit, you might also qualify for New Enterprise Allowance, a government-funded support package for prospective entrepreneurs that amounts to £1247 over 26 weeks. It’s modest, but might suffice to get started as a sole trader on a small scale.

2. Crowdfunding

Crowdfunding can potentially can help you raise a significant amount of cash without going cap in hand to your bank for a loan and there are a couple of different types to choose from.

Traditional crowdfunding on platforms like Kickstarter or Indiegogo involves raising capital from members of the public through cash donations or pre-sale of a product.

Whereas capital from an equity crowdfunding platform like Seedrs is raised from the crowd through sale of securities — put simply, people will invest in your business in return for owning a share of it.

Crowdfunding is unregulated and equity crowdfunding is regulated, but there are risks associated with both.


3. Equity release

If you’re over 55 and have paid off your mortgage, equity release allows you to unlock some of your property’s equity to use as you see fit — including a vehicle or office for your business.

The most popular scheme is a lifetime mortgage — it involves taking out a mortgage on your main residence while retaining ownership and paying back the loan and any interest built up when you move into long-term care or pass away.

You can take a large lump sum or withdraw smaller payments when you need them, either making regular repayments or allowing the interest to roll over.

Talk to an independent financial adviser prior to signing on the dotted line, but you’ll find more information from marketing website Later Life Lending and a calculator to provide a general idea of the amount of equity you might be able to release.

So, there are three alternative ways over 50s can finance a startup — they should provide food for financial thought.

How did you fund your over 50s business? Share your tips in the comments section.