One of the most appealing aspects of being a franchise owner is having the freedom to make the best financial decisions for yourself and your business. While funding options may seem endless, some of these options offer more freedom than others. By Jeff Waldera
One of the most appealing aspects of being a franchise owner is having the freedom to make the best financial decisions for yourself and your business. While funding options may seem endless, some of these options offer more freedom than others. Simply put: debt funding versus equity funding. ROBS (Rollover for Business Startup) Funding is one of the most flexible ways to capitalize a business today using equity – non debt – and preserving your hard-earned cash.
Using Your 401(k) to Finance Your Business
There are many advantages to using 401(k) funds, or other qualified pre-tax retirement funds, such as a traditional, non-Roth IRA, TSP, Pension, Keogh, or 403b – to finance growth expenses for your business.
It’s your money: The funds in your retirement account(s) are your money you have already saved and earned. Unlike a loan from a bank, credit union or other financial institution that is borrowed money, using 401(k) funds to capitalize your franchise means more equity on day one because you are investing money you already have. What’s more, if your spouse or business partner also has pre-tax retirement funds, they can invest alongside you using the same ROBS process.
Ease and convenience: Utilizing 401(k) funds minimizes the amount of time involved in applying for and securing funding from outside institutions. A 401(k) Rollover can be achieved in as little as three to four weeks, because you are not applying to an outside lender for a line of credit or a loan. Instead, you can spend your time focusing on your business goals and putting your funds to use.
Avoid debt: The most significant difference between 401(k) Rollover Funding and other borrowing options is that with your 401(k) there is no “lender” involved. You’re not taking out a loan with principal, interest, and a repayment schedule; you are “rolling” over your investments into a new company.
Independence: Rollovers funds can be used for any business expense, including salary, giving you – the franchise owner – the ultimate say-so on how your capital can be spent.
– Jeff Waldera
For more small business tips, visit the Tenet Financial Group blog at tenetfinancialgroup.com/blog.
Jeff Waldera has spent the last two decades helping individuals and small businesses achieve their goals. For 17 years, Jeff was as financial advisor, utilizing a comprehensive planning process throughout the relationship: Service was a key element of the process. He has spent the last two 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 and 608-234-5205.