Home Advertise Contact Blog Advertiser Login RSS
Newsletter Signup

Your Free Business Opportunity Resource Is Easy To Use
Home-Based Businesses
Choosing a Business Opportunity Growth and Profit Marketing and Sales
Plans and Goals Running Your Own Business Start-Up
Working From Home Entrepreneur Exchange Feature Articles
Opportunity Community Opportunity Focus In The News

Optimizing Your Business for Mobile - Not too long ago, your business would be considered tech savvy if your website was easy to read on a smartphone and employees could access their emails on the go.

But, with how quickly the digital world is moving these days, this is just the beginning...

Getting Started CRM - Customer Relationship Management software, usually called CRM, can keep your customers happy and boost your sales. The right one makes it easy to track who is buying from you and where they are in the sales cycle.

Getting Started

Common Succession Planning - Legacy planning, as owners of family businesses know, is essential for the continued success of the business.

However, that doesn’t always mean that owners take the right steps to ensure a seamless

Sponsors

STARSCAPES®
Imagine making up to $500 to $1,800 a day! Call or click now see how you can get your business for FREE! (602) 679-0257
Kaeser & Blair Promotional Products
Run Your Own Business. Be Your Own Boss. Earn Great Profit Potential. Start At A Low Cost. Try It For Free! Learn More.
 
Resource Center > Article
Funding Your New Business Start-Up with Your 401K
6 Sep 11 Posted by: Kathleen C Lanza
in Start-Up
Share this Article:

Small business lending has been on the decline since its peak in 2008, according to the U.S. Small Business Administration’s Office of Advocacy as recently cited on CNNMoney.com.  As a result, countless ambitious entrepreneurs who are tired of working for someone else and who are interested in buying a business opportunity or franchise of their own are asking themselves where they can go to get the necessary start-up capital.

What many of them may not realize is that, thanks to fairly longstanding provisions in the tax code, they may be able to get the money they need by tapping into their 401K, and it’s entirely possible to do it without paying taxes or incurring penalties for early withdrawal.  However, the risk involved in going this route to finance an up-start business is considerable, so it’s important to do your homework and explore all of your options before you proceed.

Two Options for Tapping Your 401K

There are two primary ways you can access the funds in your 401K to start a new business.  The first is fairly traditional and relatively straightforward in that it is not much different than any other 401K loan.  It involves taking your 401K savings from your old company and establishing a new 401K plan in the new business’ name, whereupon you can take a traditional 401K loan from the new firm’s plan, but only with some significant restrictions.  In addition, if you don’t have the steady income necessary to repay the loan, it can all too easily go into default, which means taxes and early withdrawal penalties may then apply after all, depending on your age.

Your second option is a ROBS loan, which stands for what the IRS calls “Rollovers as Business Start-ups.”  A ROBS loan is far more complicated to pull off and often requires specialized assistance in getting all the i’s dotted and t’s crossed.  However, the payoff can be much greater, as ROBS loans allow you to access more money without incurring fees.  When it comes to getting a ROBS loan, business valuation is a critical component of whether or not it will be approved.  As a result, it may be easier to obtain a loan of this kind to purchase an existing business opportunity or franchise based on a proven business model than it would be an entirely new start-up.

While it’s true that funding a new business venture with your 401K assets can be a risky endeavor, many would argue that when you borrow money from any source, you’re taking a significant risk.  After all, most standard loans require you to put up valuable collateral, impose substantial interest rates and obligate you to oftentimes painful terms, including having to make payments before you've even made profits. 

Of course, financing a business with 401K money isn’t for everyone.  It’s a serious gamble, one that can certainly break your future.  To be fair, it’s also one that a number of now successful entrepreneurs have found has made theirs.  The fact is that no one else will ever believe in you as much as you do.  Once you know what’s at stake and what the possible trade-offs might be and you’ve honestly assessed yourself and the likelihood that you’ll be successful, the question boils down to this:  Are you worth the risk?

Related Blog Posts
6 May 17 Posted by: Kevin James Culp
in Start-Up

Getting Started CRM - Customer Relationship Management software, usually called CRM, can keep your customers happy and boost your sales. The right one makes it easy to track who is buying from you and where they are in the sales cycle.

Getting Started
25 Apr 17 Posted by: Dr. Federer
in Start-Up

Common Succession Planning - Legacy planning, as owners of family businesses know, is essential for the continued success of the business.

However, that doesn’t always mean that owners take the right steps to ensure a seamless
8 Jun 16 Posted by: Kevin James Culp
in Start-Up

Commercial Property 101: Leasing commercial space can be hugely beneficial for your business and a great way to cut down your overheads.

However, there are lots of things you need to consider before leasing a commercial property to ensure that you’re making the right decision for your business....
19 Apr 16 Posted by: Todd Hatch
in Start-Up

StartUp Marketing - There is a wave of sheer exhilaration that comes with finishing your product or getting your startup to the starting line. But according to many entrepreneurs, that’s when the real work begins. People need to know what you have to offer before you can make money.

StartUp Marketing...
28 Mar 16 Posted by: Kevin James Culp
in Start-Up

StartUp Financing: Are you having trouble getting people to buy your expensive products or services? Whether you are offering a business opportunity or a franchise, you are not alone.

StartUp Financing: Even after your target audience is sold on the worth...
 
   

Entrepreneur Exchange is our forum where we interview the Influencers, CEO's, Author's, Business Owners Of All Types, Shapes and Sizes.

Entrepreneur Exchange: Today, we sat down with Marc Winkelman, CEO of
Video Spotlight

Become a Dealer For Our Portable Self Loading Forklift! We Want To Talk With You. Call Us Toll-Free for Additional Information at 1-866-924-LIFT (5438) Today!


Premium Sponsor