Funding Your Start-Up Using an IRA or 401(k)
Financing is crucial in getting your business up and running – to ensure you have the working capital necessary to sustain your business in the span of time between signing the franchise agreement and when you begin making a profit.
We have relationships with many leading franchise funding companies. These companies offer a wide variety of financial services, such as 401(k) rollover, unsecured loans, and Small Business Administration assistance. Did you know that you have the ability to use your retirement fund(s) to invest in your business without penalty and tax from the Internal Revenue Service? This proven, non-traditional funding source will allow for your business to start debt-free, cash rich. It is not a debit and it’s not a loan.
An article recently published in in Inc. magazine covers the steps, risks, and options of funding your new business using your 401(k). “The steps to financing a business with your retirement savings are simple enough,” the article states, “but legally are a bit complex.”
By following a careful plan of action, individuals who qualify for this type of funding plan can use the cash from their IRA or 401(k) to purchase a franchise or business opportunity. Even if you still need to get an SBA loan, you can use the proceeds from your retirement fund rollover as your down payment.
The article also states that, once individuals complete the process, “a popular option is also to buy a franchise.” Due to regulations in the IRS code, you could be penalized if the business you purchase is not fairly valued. For this reason, “some people argue that buying a franchise is the best way to use this type of financing. ‘It’s easier to value a franchise than a business that’s never been run before,’ [Dick] O’Donnell [senior tax analyst in Thomas Reuters’ tax and accounting business] says.”
Of course, as with all things, there are risks. In addition to IRS regulations, there are considerations under the Employee Retirement Income Security Act (ERISA). We have identified companies that can handle the complexity of this process and the necessary management of the plan so you can start your business worry-free.
To read the complete article, follow this link http://www.inc.com/guides/2010/05/financing-a-business-with-your-401k.html
For more information on how retirement fund rollovers can help finance your business, please call us today, 551-804-6185.