Why You Should Fund a New Business Using Your 401K

This is a sponsored post written by me on behalf of Guidant Financial. All opinions are 100% mine.

Have you ever dreamed of getting off the corporate rollercoaster and starting your own business? Did you give up on that dream due to a lack of funding? Don’t give up because there may actually be a way for you to turn your dreams into a reality. You may be able to fund a new business using your 401(k).

1. Gives You Options

401(k) Business Financing is also called a Rollover for Business Startups, or ROBS. Using this option to finance a business allows you to buy a small business already in existence and turning a profit. Or, you could buy a franchise using ROBS. Another option is to follow your own dreams and start a completely new business on your own.

2. Avoid Getting a Loan

Using your own 401(k) funds to finance your business start-up may help you avoid having to get a loan in order to start your business. Many entrepreneurs have used Debt Free Financing to start a business without having to make monthly payments back to a lender, and you can too. Essentially, you use your retirement funds to buy stock in a corporation that then uses those funds to purchase a business or franchise.  It’s like investing in the stock market, but you’ll be able to control this investment as the business owner.

The alternative of taking out a traditional loan at a bank using your home as collateral can leave you with massive amounts of debt. The interest you have to pay on your loan makes it difficult to ever climb out of debt and could strap your business’s cash flow.

3. Make Profits Sooner

By choosing to roll over your 401(k) funds to finance your business, you can begin making profits sooner rather than later. Without monthly payments to make, Man people have successfully started businesses and lowered their overhead costs, putting them ahead of their competition.

4. It’s Fast and Easy

Using your own retirement account as small business financing can be a fast and easy process. It only takes 3 – 4 weeks to get funded, and there’s not even a credit score requirement. In addition, you can continue to save for retirement while still building your business.  The 401(k) Business Financing arrangement requires your new business to create a retirement fund so you can contribute to your nest egg as your business grows.

5. No Tax Penalties

The good news is that you can use ROBS to launch your new business without having to take a taxable distribution from your 401(k). Of course, the Employee Retirement Income Security Act must be followed as well as any IRS codes, but using your 401(k) is a completely legal way to fund a business. In fact, you can do so tax penalty-free using your eligible retirement account.

6. No Monthly Payments

401(k) Business Financing allows you to breathe a little easier as you fund your new business without the hassles and obligation of monthly payments. The knowledge that you don’t have a loan payment you must make each month even if your business isn’t in the black quite yet can be a huge relief.

Of course, starting your own business still carries risks and using an ROBS to fund it won’t eliminate them. However, funding a new business using your 401(k) can help you turn your dreams into a reality.

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