Financing your dream small business or franchise is possible with 401(k) business financing, also known as Rollovers as Business Startups or ROBS. The company that can help you through the loan process and beyond? As America’s #1 ROBS provider and a trusted leader in small business financing, Guidant Financial can help you throughout your funding journey with ROBS.
When you’re looking for a company to partner with in making your dreams of small business ownership a reality, doing your homework is key. Becoming a business owner is one of the most exciting and challenging decisions you’ll make — and you’ll want to have a strong support system behind you, and know all the facts before you jump in with both feet.
As you do your research on companies and financing options, you might ask yourself: What is Rollovers as Business Startups (ROBS)? Is this type of 401(k) business financing legal? What does Guidant Financial, or a ROBS provider, even do? Are ROBS providers scams or legitimate companies? These are exactly the questions we’ll answer here. Keep reading for more information about Guidant — and most importantly, how we can help you use your retirement funds to secure your small business or franchise.
Let’s start with one of the most commonly asked questions among entrepreneurs considering ROBS…
Ready to start your business dream? Here are the 10 Steps to Starting a Business.
Is ROBS Legal?
Is this “Rollovers for Business Startups (ROBS)” thing legitimate? The short answer is: Yes. In fact, ROBS or 401(k) business financing is a smart and legal way to use your retirement funds to fund your small business or franchise. To gain a better understanding of what ROBS is, let’s discuss how it works.
Also called 401(k) business financing, ROBS is a method of funding where you use money from an eligible retirement account to buy a small business or franchise without incurring tax penalties or getting a loan. The ROBS program was made possible by the Employee Income Security Act of 1974 (ERISA), which passed the responsibility of retirement saving from the employer to the employee. In simple terms, you have the right to use your retirement funds as you see fit — including for a small business.
That said, the ROBS structure must be formed correctly to qualify under IRS code and involves five steps. Although complex, these steps can usually be completed in about three weeks. We’ll break them down for you here:
How ROBS Works in 5 Steps:
- A new business is established as a C Corporation (C Corp). (More on why this is so important later.)
- That corporation creates a new 401(k) plan that can purchase private stock.
- Funds from the existing retirement account are rolled into the new 401(k) plan — without triggering a taxable distribution.
- The 401(k) plan purchases stock in the C Corp.
- The C Corp acquires or starts a business using these funds.
A C Corporation is a business entity — and to use ROBS, you need to register your business as one. But what is a “C Corp” and its potential downsides or upsides? Find out here.
What is ROBS?
Watch this four-minute video that breaks down how 401(k) business financing — also known as Rollovers for Business Startups (ROBS) — works from a ROBS Guidant Expert, Katie Burckhardt. In this video, Katie will overview:
- What is ROBS?
- How does ROBS work?
- What retirement plans are qualified for ROBS?
- How can I fund my business with ROBS?
For a full breakdown on what ROBS is — and how the ROBS structure can work in favor of your business, see more in What is ROBS? How 401(k) Business Financing Works.
What are the Benefits of ROBS?
Let’s discuss the benefits of the tax-free arrangement that’s helped thousands of entrepreneurs buy businesses they otherwise might not have been able to afford. Some entrepreneurs even find 401(k) financing has given them a leg up over competition as they have less (if any) debt to repay. Learn Everything You Need to Know About ROBS in our latest FREE webinar.
Benefits of ROBS
- Control over your investment performance. Unlike investing in the stock market, using ROBS allows you to directly impact the performance of your business.
- Quicker path to profitability. Because ROBS is not a loan, there are no interest rates involved, and no repayments to be made. Whatever revenue your business brings in can be reinvested back into the business.
- No credit score requirements. If you have at least $50,000 in a rollable retirement account, you’re eligible to use the ROBS method. There are no credit or collateral requirements.
- Funds can be used as a loan down payment. If you still need a small business loan, the rolled funds from ROBS can be used as the down payment, allowing you to keep your personal savings intact.
Take a closer look at the Pros and Cons of ROBS (Rollovers for Business Startups).
The ROBS Requirements
While the ROBS structure doesn’t have many qualification requirements, you’ll need to adhere to strict guidelines in the formation and maintenance of ROBS plans. These include:
- The business entity must be a C corporation. You’ll see this mentioned each time ROBS is discussed. That’s because the ROBS arrangement is hinged on the sale of Qualified Employer Securities (QES). This means the business you start or buy must operate as a C corporation, which can sell stock. If you want to know more about C corporations, you can learn more in our Complete Guide to ROBS.
- A new retirement plan that allows for the purchase of private stock must be created for the corporation (usually a 401(k) plan). You get to choose the plan type, but most Guidant clients select a standard 401(k) plan. Other options include defined benefits, defined contributions, profit sharing or a combination of plans. Once a plan type is selected, you’ll need to select a custodian to manage the actual investments in the plan.
- The business owner must serve as a fiduciary for the retirement plan. This means, as the business owner, you must always do what’s in the best interest of the plan.
- The retirement plan must file an annual report (IRS Form 5500). A third-party administration firm handles the plan administration and will prepare the necessary annual reporting and file your annual Form 5500.
- All benefits, rights and features of the retirement plan must be made effectively available to employees. All participating employees must be treated equally, so you’ll need to manage the plan to ensure you comply with this requirement.
- The plan must keep an accurate recordkeeping system to track and determine plan participation, contributions, earning and losses, etc. Don’t forget your corporate taxes are different than your obligation to file the aforementioned Form 5500 each year.
Because these requirements can be daunting, you may want to work with a qualified ROBS provider who can ensure you meet all these conditions and provide assistance in the ongoing maintenance of the plan. This is where Guidant Financial comes in.
Is your retirement plan eligible for ROBS? The good news is most retirement plans are! See 10 Types of Eligible Retirement Plans for 401(k) Business Financing.
The #1 Leader in ROBS and Small Business Financing
Since 2003, Guidant Financial has made a name for itself as an industry leader in small business financing, especially for ROBS. Our team has helped more than 30,000 business owners all 50 states invest more than $5 billion in retirement assets into small businesses and franchises. These businesses directly employ over 80,000 Americans. Learn more about Guidant here.
While our former headquarters were located in Bellevue, Washington and Boise, Idaho, Guidant is now a fully remote company with about 240 dedicated professionals who are passionate about serving entrepreneurs. This includes the following:
- Financial Consultants. This team is dedicated to helping you identify whether ROBS is right for you. They can provide tools and resources to educate you on ROBS, and even help you choose the right business to buy.
- ROBS Onboarding Team. This department specializes in helping you set up your new C Corporation and retirement plan, so you can rollover your retirement funds tax penalty-free.
- 401(k) Plan Administration. Once your corporation is funded, our Plan Administration team helps maintain your 401(k) plan and prepare your IRS Form 5500.
- Legal. Guidant’s in-house compliance team reviews your annual Form 5500 to ensure your plan remains in good standing.
More on Guidant’s Administration Services and Legal Representation
After you’ve set up your new corporation and 401(k) plan, you can become a Guidant administration client for an affordable flat monthly fee. Guidant can do your record-keeping and prepare your annual Form 5500, complete required and elective plan amendments, and provide a dedicated support team and legal counsel.
We also partner with experienced tax attorneys who assist you in the setup and ongoing maintenance of your 401(k) plan as a part of your record-keeping services. We refer to these attorneys as your “Outside Counsel” because they don’t work for Guidant — they represent you and your best interests. This is another way that Guidant helps protect you and your unique financial goals when it comes to the world of small business.
As a part of our robust legal services, we also provide full audit protection. If your 401(k) plan is ever audited, both our in-house staff and specialized Outside Counsel will work with you through the audit as a part of your record-keeping services — potentially saving you thousands of dollars in legal representation. No Guidant client has ever paid tax penalties due to the ROBS structure.
Don’t Just Take Our Word for It
Understandably, it can be tough putting your trust in a company that’s hundreds or even thousands of miles away from where you plan to build your new business. Of the many financial providers available to you, we believe we’re the best candidate for the job — but keep reading to learn why. Many industry and civic organizations have helped validate our work:
- We’re rated A+ by the Better Business Bureau.
- Ranked in the Top 3 Financing Solutions in Entrepreneur Magazine’s Franchisor’s Supplier’s Awards for the last six years.
- Nominated as a finalist for the 2023 Better Business Bureau (BBB) Torch Award in Ethic’s.
- We’re one of the Inc. 5000 – the fastest growing companies in the country.
- Our founders are recognized leaders and champions of entrepreneurship.
- We have a trophy case of honors and awards.
- We maintain a level of high satisfaction on Reseller Ratings.
You can also hear what some of our current clients have to say about us and their thriving small businesses and franchises:
- Tom Gonzalez and Pamela Chandler, Woof Academy – Encinitas, CA
- Mike Brown, The Flying Locksmiths – Metro West, MA
- Larry and Rusty Strain, A Rustyc Spoon – Pensacola, FL
- Stephen Such, Falling Sky Brewing – Portland, OR
Discover more Guidant client success stories here.
Looking for inspiration? See our 5 Must-Know Guidant Business Owner Success Stories.
Additional Business Financing Options with Guidant
As previously mentioned, one of the benefits of ROBS is that it can be used in conjunction with other forms of business financing. Guidant offers a full suite of financing options that can be used alone or in combination with ROBS to help you meet your total funding needs:
Business Valuation Solutions
In addition to business financing options, Guidant offers business valuation solutions to bring transparency to the often difficult and time-consuming process of understanding the value of a business. If you’re not sure where to start looking when you’re trying to value, buy, or sell a business, you’re not alone. But now you have the following resources to help value a business faster and with less hassle:
Business Services
At Guidant, we’re in the business of helping small businesses succeed. That’s why we over a host of business services — tailored for small business owners to thrive and stay in budget. The best part? You’ll work with a real team of financial experts who are dedicated to helping you meet your business goals. Guidant can support you throughout the lifetime of your business with:
Final Thoughts and Resources
We hope this helps you get to know Guidant a bit better and ease your mind about our company and our 401(k) financing offering. If someone asks, “Is 401(k) financing legal?” or “Is Guidant legitimate?”, you’ll now be able to answer “yes” — quickly and confidently. As you continue to research small business financing partners, we suggest reviewing these resources as a next step:
- The Complete Guide to Small Business Funding Options
- The Complete Guide to Becoming a Small Business Owner
- The Complete Guide to Rollovers for Business Start-ups
- 8 Common Myths about Rollovers for Business Start-ups
Remember: Our team is always happy to talk with you about turning your dream venture into your reality — with whatever form of financing works best for you.
Call us today at 425-289-3200 for a free, no-pressure business consultation to get started — or pre-qualify in minutes for business financing now!
“I owe a sense of gratitude to Guidant for helping me get here. It was a turning point for us moving forward.”
— Stephen Such, Falling Sky Brewing
Read the stories of REAL small business owners who work with Guidant.
