Looking for small business funding but aren’t sure where to turn? Let us introduce you to 401(k) Business Financing (also known as ROBS), a funding options that allows you to tap your retirement funds tax and penalty-free to financing your business. Sound too good to be true? It’s not, we promise. In this in-depth, complete guide to ROBS, you’ll learn everything there is to know about this unique and viable business financing solution.

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Coming Up Short While Sitting on a Goldmine

All too often, aspiring business owners turn only to the funding sources they’re familiar with. A recent survey of entrepreneurs reveals that over fifty percent used personal checking and savings accounts to fund their business. This is an excellent option, if you need less than $50,000 to get started. But for business ventures that cost more, most entrepreneurs are out of luck. After all, not many of us are sitting on a few hundred thousand extra dollars.

The next logical step most entrepreneurs turn to is a bank loan. You got your mortgage from a bank, why should a business loan be any different? While SBA loans can be an excellent source of funding, only about 25 percent of applicant are approved. If you’re one of the lucky recipients, you’ll still need to bring 20 to 30 percent down payment – and collateralize your home. If you’re denied an SBA loan, don’t have cash for the down payment or aren’t interested in collateralizing your home, your options are further limited.

There are other forms of debt-financing with less friendly terms than the SBA loan – but again, those come with their own requirements (not to mention the burden of starting your business under a pile of debt). Is it starting to feel like your dream of business ownership wasn’t meant to be? You’re not alone.

Thankfully, there another option. Let’s take a look behind door number three: the pre-tax retirement funds you’ve been steadily building since entering the workforce. Your 401(k) or IRA is an untapped mountain of cash, and is the bases for 401(k) Business Financing. This little-known financing solution, formally known as Rollovers for Business Start-ups, is a debt-free option that thousands of entrepreneurs across the country have used to make their business dreams a reality.

What is Rollovers for Business Start-Ups

Rollovers for Business Start-Ups (ROBS) is a small business and franchise funding solution. ROBS involves using your 401(k), IRA or other eligible retirement accounts to provide the cash to purchase or start a business – without incurring an early withdrawal fee (if you’re younger than 59 and a half) or taxation.

ROBS is most commonly used by individuals who do not have the cash on hand to outright purchase the business — which is most of us, let’s be real. It is also great for people don’t want to go into debt and/or collateralize their home or other personal assets. It is an ideal funding method for those who have $50,000 or more in their retirement fund and want to invest in themselves instead of the stock market.

What will be covered in this guide?

In this complete guide, we’ll walk through everything you need to know about Rollovers for Business Start-ups: exactly how it works; the history and legality; the advantages of this product and how ROBS compares to other funding methods; the truth about common misconceptions; what to look for in a quality ROBS provider; the annual requirements and upkeep; dos and don’ts of the structure; how to explain ROBS to your CPA or tax attorney; and how to exit the structure when you’re ready to sell your business.

How much of this guide do I need to read?

If you’re serious about funding a business or franchise without going into debt or putting your home on the line, we recommend reading this guide start to finish. Each chapter presents a concise view of an element of Rollovers for Business Start-ups, and proceeds in a linear order to build your knowledge base before moving on to the next topic.

By the end of this guide, you’ll know every detail there is to know about this fascinating business financing solution. Let’s get started!