RENEWED claims that several banks are not meeting Government-agreed lending targets highlight the fact that many small businesses still face significant cashflow problems.

Other difficulties for small and medium-sized enterprises (SMEs) seeking to maintain liquidity include the stringent criteria implemented by banks that are lending and the fact that, after the economic shocks of recent years, many small businesses have lost their appetite for debt.

In many cases, particularly as a result of the past decade’s trend to buy rather than lease commercial property, the only tangible asset many small businesses have is their premises.

However, for generating cash flow, now is not the time to sell business premises as values are low and an SME would have to significantly discount the asking price.

When considered alongside the disappointing stock market performance facing some equity-linked private pensions, many SMEs have been forced to consider alternative routes to maintain cashflow without harming their longterm assets.

One of these is to consolidate their existing pensions into a self invested personal pension (Sipp) and use the funds to buy back their commercial premises and unlock cashflow for their enterprise.

Although this means that the business no longer owns the premises, the approach is an effective cash-raising route for many SMEs because it avoids having to re-mortgage at high rates to banks, sidesteps having to significantly cut values to attract buyers and allows pension holders to take greater control of their assets.

A potential disadvantage is that the investor’s assets are in one investment with no diversification.

It could also present difficulties if the property has to be sold quickly.

Transferring to a Sipp in this way enables the pension trustees to lease the building back to the enterprise and extract profit from the business tax efficiently.

If you are considering converting a private pension to a Sipp, you need to take professional advice.

• Harry O’Connor is a wealth management consultant with Pearson Jones PLC, in Bank Chambers, 9 Kensington, Cockton Hill Road, Bishop Auckland, County Durham, DL14 6HX.