We’re currently experiencing a service outage for our [product]. Our team is actively working on resolving the issue. Our IT experts are working tirelessly to restore service as quickly as possible.

Using Your 401(k) as an SBA Loan Down Payment—Penalty-Free

Are you looking for ways to fund a small business loan? Learn how you can use your 401(k) as an SBA loan down payment — all without penalty fees.
Using ROBS as an SBA loan down payment - Image showing a piggy bank wearing glasses next to a pile of books with the word "Loan" on the top.

Are you considering applying for a Small Business Administration (SBA) loan to start or grow your business? The process of securing these traditional business loans can be challenging — especially when faced with a substantial SBA loan down payment, as SBA business loans generally require up to a 30 percent down payment.

But with 401(k) business financing, you can use your retirement funds as an SBA down payment without incurring withdrawal penalty fees or depleting your savings. Keep reading to learn how this little-known financing method can help you secure an SBA loan — and make your business cash-rich.

How Do SBA Loans and SBA Loan Down Payments Work?

Graphic of a small business owner shaking hands with a bank representative with a stamped loan in the background. (Using Your 401(k) as an SBA Loan Down Payment - Guidant Block.)

The U.S. Small Business Administration (SBA) offers a variety of loan programs to small businesses. These loans are designed to provide more financial support to entrepreneurs across America — and have been offered by the SBA since the 1950s. SBA loans are secured by the government and often have less stringent requirements than conventional loans, making them an attractive option for many business owners.

For many entrepreneurs seeking financing, a traditional small business loan is often the first method they try. But when average loan amounts are $400,000 or more, an SBA loan down payment can be difficult for many to meet.

Now that the administration has mandated a minimum 10 percent SBA loan down payment (and most individual lenders require up to 25-30 percent), the necessary cash needed as an SBA down payment can range from $40,000 to $120,000 or more for an average-sized loan. This hefty down payment amount can be intimidating for many aspiring and current small business owners.

Even well-qualified borrowers will only be approved for small business financing if they provide a sufficient down payment. But the journey to business ownership doesn’t have to end when traditional financing methods seem impossible — and making a down payment on a loan doesn’t have to mean depleting your personal savings!

For those needing to meet an SBA down payment amount, 401(k) business financing can help close the gap between obtaining a loan and the cash needed to qualify.

Are SBA loans right for you and your business? See our Complete Guide to Everything You Need to Know About SBA Loans for a comprehensive breakdown of this financing method.

What is 401(k) Financing?

Also known as Rollovers for Business Startups (ROBS), 401(k) business financing allows you to use your retirement funds to start or buy a business — all while avoiding withdrawal penalty fees.

Anyone with a minimum of $50,000 in a rollable retirement account (such as an IRA, 401(k), or 403(b)) can obtain business financing using this method in a matter of weeks, regardless of their credit score. And because ROBS isn’t a loan, there are no monthly payments to make.

As an investment strategy, ROBS has been increasingly popular among entrepreneurs — as many choose to utilize ROBS to avoid paying monthly loan payments and accruing debt.  In fact, over half of the business owners surveyed in our annual Small Business Trends study utilized ROBS this year.

Learn the ins and outs of 401(k) business financing in our latest webinar: Everything You Need to Know About Rollovers for Business Startups (ROBS)!

Using Rollovers for Business Startups (ROBS) as an SBA Down Payment

Piggy bank next to a jar full of money that has the tag "Down Payment" on it sitting on a pedestal. An outline of a house covers the scene. (Using ROBS as an SBA Down Payment - Guidant Blog).

When used as the down payment on a loan, ROBS can help current and aspiring business owners become more qualified and confident borrowers. Not only can the retirement funds rolled over in a ROBS transaction fulfill the cash requirement on an SBA loan, but this method also helps business owners to preserve their personal savings.

Accessing retirement funds for business financing also likely means making a larger down payment, which can help make monthly payments more manageable — and, in many cases, means better loan terms. A larger down payment means more buying power and more flexibility when launching a business. Additionally, with SBA loan payments and interest rates on the rise, a ROBS-backed SBA loan could be your ticket to making affordable business financing a reality.

How ROBS and SBA Down Payments Work Together

The ROBS transaction is completed by rolling up to 100 percent of your original retirement account into a new 401(k) account established on behalf of a new C Corporation (this might sound complex, but a third party ROBS provider or plan administrator can walk you through each step).

The six-step process of utilizing ROBS for an SBA loan down payment.

Once the funding transaction is complete and the funds have hit your new corporate bank account, the money can then be used to finance your business — including as a down payment on an SBA loan, meeting regular SBA loan payment requirements, or investing in seller financing agreements.

How do you know which ROBS Plan Administrator is right for you? See How to Pick the Right ROBS Provider.

Benefits of Using ROBS as a Business Loan Down Payment

Using 401(k) business financing as a loan down payment may be the best way — and for some business owners, the only way — to secure an SBA loan or seller financing. Luckily, this funding method is accessible and comes with additional benefits that can help your business succeed:

  • Fast Funding — You can gain access to your retirement plan funds in as little as three weeks with ROBS. Speed of funding is often a crucial component of closing a deal with sellers, loan officers, and business brokers.
  • Protect Your Savings — Using ROBS as an SBA loan down payment allows you to protect your personal savings, so you have cash on hand for emergencies, unexpected expenses, etc. ROBS funding is not a loan, so there are no monthly payments to make or interest incurred.
  • Larger Down Payment — Having a larger SBA loan down payment makes you a more attractive borrower. Putting more cash down reduces the risk for the lender, which means they are more likely to approve you for the loan, lend a larger amount, and provide more competitive terms.

Qualifying for ROBS Business Financing

Woman looking reflectively while at her desk. (Using Your 401(k) as an SBA loan down payment - Guidant Blog.)

There are no collateral or minimum credit score requirements to be approved for ROBS funding, so using your retirement plan funds as the down payment on a business loan is fast and easy. ROBS requirements include:

  • Having at least $50,000 in one pre-tax retirement account, including 401(k)s, traditional IRAs, TSPs, 403(b)s, Keoghs, or SEPs. (Note: Roth IRAs do not qualify since those funds have already been taxed.)
  • The company funded must be an active, operating company. In other words, ROBS cannot fund a passive investment.
  • The owner of the retirement funds must be an active employee of the new corporation, working in whatever capacity they see fit.

Want to learn more about combining ROBS and SBA loans or seller financing?
Download our free eBook, “How to Use Your Retirement Funds as the Down Payment on a Business Loan,” or check out our Complete Guide to Rollovers for Business Startups.

The First Step to Using Retirement Funds as a Down Payment on a Business Loan

If you’re ready to move forward, the best way to get started is to pre-qualify. Using Guidant’s pre-qualification tool, you can quickly learn which funding methods you’re eligible for, your total available funding amount, and an overview of your business funding options.

Pre-qualification can be done online in minutes — without impacting your credit score. Get pre-qualified now.

If this was useful, you might like:

Ready to use your retirement funds to start your business?

No more questions about ROBS? Great! Let’s get the process started today!

Scroll to Top

Get The eBook

Everything You Need to Know About
Rollovers for Business Start-Ups (ROBS)
This eBooks includes:


The steps to fund your business debt-free in as little as three weeks.


How to structure your corporation according to IRS guidelines.


Tips to control your future and direct your retirement funds.


How to earn a salary, save for retirement and be your own boss.

Featured In:

Download The Complete Guide to 401(K) Business Financing: ROBS

By pressing “Download the Guide”, you agree to this websites Privacy Policy, and you consent to receive information from Guidant Financial at the email address or telephone numbers you provided.