Don't Forget About Your 401(K)

It’s that time again—the time of year when many of us are closely reacquainted with our finances during tax season. We get a fresh look at the most updated numbers, including our retirement funds. One of the things we remind our clients is that your 401(k) can be a financing option when buying a business.

After realizing that many people didn’t know they had the ability to use their 401(k) as business financing, Resolution Equity Partners owner, Mark Kincannon, wrote an shared the following of 401(k) participants:

“These are hardworking, self-motivated, committed folks.  Usually these frugal minded, diligent people have saved money in a 401K or some other type of retirement account.  Many of these people have always dreamed of owning their own business, but didn’t think it was possible.  They just figured they were always going to work for someone else because they didn’t have the resources. 

My experience is that many of these people are saving for retirement, and if they have been working for 10+ years they usually have enough money in those retirement accounts to fulfill their dream of being their own boss.”

BizBuySell also published an article outlining the specifics of this process:

“Rollovers for Business Start-ups (ROBS), also known as 401(k) business financing, allows business owners to use their retirement funds to start, buy, or inject funds into a business without incurring tax penalties.

The most notable requirement for ROBS is that you have a rollable retirement fund. Most ROBS providers also recommend having at least $50,000 in this fund; otherwise, provider costs and other fees outweigh the benefits.

ROBS is not a loan, so there’s no credit, collateral, or down payment requirements. In fact, ROBS can be a great option for accessing funds for a down payment for other funding methods, such as SBA loans.”

If we can help you answer any questions about what the process would look like, please contact us today!