Finance a franchise with your 401k, penalty-free
A looming question for anyone making plans to buy into a franchise is frequently: how am I going to pay for it? Money can be a big area of stress for all of us, but the good news is that there are many options for financing.
Did you know that you can use retirement funds without penalty or upfront taxes to start or purchase a business? This method, which is essentially a 401(k) rollover, is called ROBS, or “Rollovers for Business Start Ups.”
Here are a few advantages of ROBS funding:
ROBS is a way to tap into your retirement funds and use them as business capital without incurring the early withdrawal or tax penalties that would otherwise come with early withdrawals from these accounts. Since it’s not a loan, there are no interest payments involved, which means a quicker path to profitability and a better chance of business success.
ROBS funding helps you start your business on solid footing, with improved cash flow and business equity. It’s not considered debt once you open your doors for business. Less debt is always a positive for a business owner, as it makes more funds available for operational expenses and increases your initial equity.
By using ROBS funding, you’re exercising control over your investment. Rather than putting your money into the stock market, you’re using retirement funds to invest in yourself and your own business. This puts you in the driver’s seat, as you can directly impact the performance of your business and ultimately the return on your investment.
You do not need personal collateral to qualify. If you have just $50,000 in a retirement account you can roll over, such as a 401(k), IRA, or 403(b), you qualify.
ROBS funding can provide a down payment on a larger loan. If funds available in your 401(k) aren’t enough to get your business started, you can use these funds to provide a down payment on a larger Small Business Administration (SBA) loan.
If you want to know more about the ins and outs of ROBS, check out this article that goes into more detail. Then reach out to me so I can introduce you to my trusted contacts at the funding companies that specialize in ROBS. They’ll fill you in on everything you need to know to figure out if this strategy may be the right fit for you.
As with any financial decision there are pros and cons to consider, but it’s wise to look into all available funding avenues. Schedule a call with me to learn more about ROBS and the next steps you can take to explore this avenue.