It shouldn’t be so hard to get small business or franchise financing.
Local banks decline 80% of aspiring small business owners for loans. Few people have enough money on-hand to start or buy a business or franchise outright. Why struggle with these barriers when you have the money to invest in yourself?
Easy Qualification
You don’t need collateral or a perfect credit score to get your financing.
Debt-Free
Don’t let interest payments control your business decisions. Get funded without going into debt.
Cash-Rich
Find a quicker path to success and profitability by starting out with an infusion of cash.
What is 401(k) Business Financing?
401(k) business financing, also known as Rollovers for Business Start-ups (ROBS), is a small business and franchise funding method. ROBS allows you to draw money from your retirement account in order to start or buy a business without incurring an early withdrawal fee or tax penalty. This is not a loan; ROBS just gives you access to your own money, so that you can build the life you want without going into debt.
No Interest, No Collateral, No Credit Score
You Can Still Grow Your Nest Egg
Fully Legal and IRS Compliant
How Does 401(k) Business Financing Work?
401(k) business financing (also known as Rollovers for Business Start-ups or ROBS) allows you to tap into your retirement account and use that money to start or buy a business or franchise. To access your money without triggering an early withdrawal fee or tax penalty, a ROBS structure must first be put in place. The structure has multiple moving parts, each of which must meet specific requirements to stay compliant with the IRS.
-
Create a New C Corporation
ROBS begins with the creation of a new C corp. The ROBS arrangement hinges on the sale of Qualified Employer Securities (QES), and a C corp is the only entity type that has the ability to sell stock within the ROBS structure.
-
Set Up a 401(k) Plan for Your C Corp
After creating your C corp, you’ll need to set up a retirement plan for your new business. Most people select a standard 401(k), though you have other options (like profit sharing and defined benefits). Once you have a plan type, select a custodian to manage the actual investments in the plan.
-
Roll Existing Funds into the New Retirement Plan
Now that your new C corp has a retirement plan, you’ll roll your retirement funds from your original, personal plan into the new retirement plan belonging to the C corp. This is where the “rollover” part of Rollovers for Business Start-ups comes from.
-
The Company Plan Buys Stock in the C Corp
With the company’s retirement plan now housing your retirement dollars from the rollover, the plan purchases stock in the C corp through a Qualified Employer Securities (QES) transaction. That’s why it’s so important to use a C corp. Without it, a QES transaction wouldn’t be possible.
-
Use the Funds to Operate Your Business
Once the QES transaction is complete, your retirement funds can be used by the corporation to begin operating and paying for business expenses! The retirement plan now owns the corporation, and the corporation is cash-rich from selling QES stock.
While the ROBS structure can be complex, the end result is your ability to buy or start a business without going into debt or collateralizing your home. For a more in-depth explanation of the ROBS structure, check out our Complete Guide to 401(k) Business Financing.
Rollovers for Business Start-ups: FAQs
Where did ROBS come from? How long has this been around?
Rollovers for Business Start-ups (ROBS) has been around for decades – since 1974. It was made possible when Congress wanted to give American workers another option for growing their retirement assets.
Is using my 401(k) to fund a business a tax loophole?
ROBS is not a tax loophole. In 1974, Congress passed the Employee Retirement Income Securities Act (ERISA), which works in conjunction with specific sections of the Internal Revenue Code (IRC) to make ROBS a legal, legitimate strategy for accessing your retirement assets to start or buy a small business.
Can I combine my retirement funds with someone else’s to fund the business?
Yes, multiple people can combine their retirement assets to create the ROBS structure. This means you and a spouse, business partner, or group can use retirement funds to start or buy a business together.
Can I pay myself a salary with ROBS?
Yes! ROBS actually requires you to be an employee of the business and to be paid fairly. The salary you pay yourself needs to fall within “reasonable bounds,” which means you shouldn’t pay yourself twice as much as your business’s annual revenue, as that’s rather unreasonable.
Do I have to offer a 401(k) to all of my employees?
Yes. ROBS requires you to offer a 401(k) plan to all eligible employees of the company, as ROBS itself is meant to be a tool to grow retirement assets.
Read All FAQ’s
Can I use ROBS to finance my franchise?
Yes! ROBS isn’t limited to independent businesses. Since a franchise is a small business, you can use most types of financing (including ROBS and SBA loans) to fund your franchise just like you would with any other business.
Do I have to use a C corporation?
Yes, it’s a ROBS requirement. Your company is funded through a stock purchase called Qualified Employer Securities (QES), which only works if you’ve set up a C corp.
What about double taxation for the C corp?
The term “double taxation” refers to the taxes you’d pay on dividends paid by the C corp. Often these taxes can be mitigated or avoided with the help of a qualified tax professional.
Can my spouse or someone else co-invest and/or be involved in the business?
Yes, co-investors and co-owners are allowed with ROBS.
What type of business can I buy with ROBS?
ROBS lets you buy or start up any legal business or franchise. ROBS can’t be used to fund a business deemed to be “solely the investment of capital” (like a factoring company or a means of passive income). Typically, the business also needs to be legal on a federal level, not just at the state level (for example, marijuana distribution is only legal in some states and not federally).
Do I have to use all of my retirement money? Can I just use part of it?
You can use as much or as little of your retirement assets as you want. We do suggest that you roll over at least $50,000, as there are diminishing returns to rolling a smaller amount.
Here’s How to Get Started
It’s easy to get started! Simply complete our pre-qualification survey to start following your small business dreams.
1
Pre-qualify
See your financing options and how much funding you can access with our two minute pre-qual.
2
Schedule a Call
Schedule a call online with a financing expert to discuss the right funding options for you.
3
Get Funded
Get your money to start or buy a business. ROBS funding can be accessed in as little as three weeks.
See How 401(k) Business Financing Can Work for You
Pre-qualify for 401(k) business financing today and receive a list of tailored funding options.
The Benefits of 401(k) Business Financing
Why should you use Rollovers for Business Start-ups to finance your small business or franchise? ROBS offers benefits not found in other forms of financing.
Debt-Free
Invest in Yourself
Cash-Rich
Down Payment for Other Financing
No Collateral
Easy Qualification
The Quick, Easy Way to Finance Your Business or Franchise
Guidant Financial is the industry leader in 401(k) business financing. We complete more Rollovers for Business Start-ups transactions each year than any other company and have the lowest audit rate in the industry.
For $4,995, here’s what you can expect from Guidant Financial:
While our guarantee is for the initial setup, it’s important to note that as a business services company, our relationship does not end once you receive funding. Our mission is to support you for the life of your business.
Most Retirement Plans Qualify
You don’t have to be a financial expert to use 401(k) business financing. All you need is at least $50,000 in a rollable retirement or pension account. Learn more about retirement or pension plans that qualify.
401(k)
This plan is usually sponsored by an employer. It is the most common plan used with ROBS.
Traditional IRA
This plan lets you invest pre-tax income that grows tax-deferred. Roth IRAs aren’t eligible for ROBS.
403(b)
This plan is available to individuals like employees of nonprofit organizations, public schools, and some hospitals.
Keogh
This plan is a tax-deferred pension plan available to self-employed individuals or unincorporated businesses.
TSP
A defined contribution plan for U.S. civil service employees, retirees, and some members of the military.
SEP
A straightforward retirement plan that any employer or self-employed individual can establish.
Use ROBS as a Down Payment
for Your Franchise or Small Business Loan
You don’t need to have enough funds in your retirement plan to completely cover the costs of your business needs. Instead, combine small business financing methods by using your ROBS funding as the down payment on an SBA loan – without triggering any tax penalties or draining your personal savings.
While both SBA loans and 401(k) business financing have advantages as stand-alone programs, together they can set you up on a path for success with a higher funding amount and lower monthly payments.
Client Stories
Guidant is a perfect vehicle for small businesses to get established. We would not have been able to start the brewery without them.Suzie & Todd, Noda Brewing Company; Charlotte, NC For husband and wife Todd and Suzie, the key to spending more time together was small business ownership. With Guidant’s help, the couple transformed their long-time home-brew hobby into their dream business.
[Guidant walks] you through the entire process of buying a business. They make sure you are set up for success. You are in business for yourself, but you are not by yourself.Bohnne, Decorating Den; Nashville, TN After experiencing a series of layoffs, Bohnne was ready for a career makeover. She took control of her future and embarked on an encore career as a business owner.
We wanted to start our business using our 401(k) funds, but we had no idea how to do it. Our friend told us about Guidant Financial, and so we contacted them and had a great experience.Rand & Janeel, eyeSmith Sport & Fashion Optical; Kansas City, MO After raising eight children, Rand and Janeel were ready to start a new chapter for their family. The couple put their past business experience to good use and tapped into their retirement funds to start an independent eyewear business.
The one piece of advice I would give to entrepreneurs is [to] just go for it … There’s a lot of things you have to think about, but just say ‘yes, I’m going to do it.’Richard and Jo-Anne The Parsonage Inn; Cape Cod, ME After 30 years in the airline industry, traveling the world and raising five children, Richard and Jo-Anne wanted to tackle a new adventure: business ownership. Guidant helped the couple buy an existing business so they could enjoy being their own boss for once.
Ready to put your retirement funds to work for you?
Don’t have any more questions about ROBS? Great, let’s get the process started today!
