Did you know you can use your existing retirement savings to fund a franchise without tax or penalty from the IRS? This process – known as a 401(k) Rollover or ROBS (Rollover as a Business Startup) – could be an excellent option if you find yourself agreeing with any of these statements. By Jeff Waldera

Did you know you can use your existing retirement savings to fund a franchise without tax or penalty from the IRS? This process – known as a 401(k) Rollover or ROBS (Rollover as a Business Startup) – could be an excellent option if you find yourself agreeing with any of these statements:

  • I want to fund my new franchise using equity and not debt.
  • I need funding quickly so I don’t stall in the franchise discovery process.
  • I need non-borrowed equity injection to close my loan.
  • I want a funding strategy that positions my franchise for growth throughout the lifetime of my business.

Let me explain further.

A Rollover is a method of using pre-tax retirement funds from a previous employer, such as a 401(k), IRA, Keogh or Pension, to provide the initial cash infusion into a new franchise. You are not withdrawing your retirement; you are simply moving it to a new investment – your new franchise! In financial circles, you’ll hear this option referred to as equity funding, since you are accessing your equity and not incurring debt.

This process has been in place since 1974, and thousands of entrepreneurs use it every single year to fund all types of businesses – from mobile pet care to gyms to restaurants and everything in between. Because it is not a loan, you don’t have to be “approved” or have collateral or even have a required credit score to take advantage of this option. What’s more, the “rolled over” funds never have to be repaid.

Don’t miss this important point: a Rollover can be used as a stand-alone funding option or you can use Rollover funding to satisfy the non-borrowed equity injection and cash reserves needed for most SBA Loans. The two funding types are not mutually exclusive and they work together quite nicely.

To take advantage of Rollover funding, select a qualified Third-Party Administrator (TPA) to design, install and provide administration for you. Compliance is critical, and having an experienced TPA in your corner will save you lots of hassle and potential IRS issues in the future.

For more small business tips, visit the Tenet Financial Group blog at tenetfinancialgroup.com/blog.

– Jeff Waldera

Jeff Waldera has spent the last two decades helping individuals and small businesses achieve their goals. For 17 years, Jeff was a Financial advisor, utilizing a comprehensive planning process throughout the relationship: Service was a key element of the process. He has spent the last three years assisting individuals with their dream of becoming business owners, by helping them feel comfortable with their funding options. Jeff can be reached at jeff@tenetfinancialgroup.com or 608-234-5205.