401(k) Funds Assist in Small Business Financing, ROBS Provide Down Payments for SBA Loans for Both Buyers and Sellers

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Since 2003, Guidant Financial, a leader in small business financing, has helped entrepreneurs use their retirement funds to start or buy a small business or franchise through 401(k) business financing (also known as Rollovers for Business Start-ups or ROBS).

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“Recently we have seen an increase in not only the awareness but the pursuit of using 401(k)s to invest in a business,” said David Nilssen, CEO of Guidant Financial.

Starting a small business is not only a dream for many but a reality thanks in part to overcoming a major hurdle – funding. With record gains realized in the stock market coupled with decades of retirement investing, entrepreneurs are turning to their 401(k)s to fund a new business. Since 2003, Guidant Financial, a leader in small business financing, has helped entrepreneurs use their retirement funds to start or buy a small business or franchise through 401(k) business financing (also known as Rollovers for Business Start-ups or ROBS). Using ROBS, entrepreneurs can access their retirement funds tax and penalty-free, and then use those funds as the down payment on a business loan.

“Recently we have seen an increase in not only the awareness but the pursuit of using 401(k)s to invest in a business,” said David Nilssen, CEO of Guidant Financial. “At Guidant, we are committed to helping business owners get the funding they need. This often includes rollovers as business startups, SBA loans or the combination of the two. Each year, we help thousands of individuals get the money they need to start or buy a business or franchise.”

Combining SBA loans with ROBS for financing works well for many new business owners. SBA loans require a 20 – 30 percent down payment. Rather than using savings, many entrepreneurs leverage ROBS as an alternative way to manage a larger down payment on a business loan. In fact, approximately half of Guidant’s Small Business Administration loan clients use ROBS in combination to finance their business endeavor.

HOW ROBS AND SBA LOANS WORK TOGETHER
When used as the down payment on an SBA loan, ROBS helps people become more qualified and confident borrowers. Not only can ROBS funding help to fulfill a loan’s capital requirement, but it also allows people to preserve their personal savings. In most cases, borrowers can invest up to 100 percent of their retirement savings, which means they’re capable of making a larger down payment and/or increase their buying power.

HOW ROBS AND SELLER FINANCING WORK TOGETHER
Seller financing is increasingly becoming a part of buying (and selling) an existing business. Combining ROBS and seller financing works well because the seller will usually only fund up to 60 percent, and most would-be buyers don’t have adequate liquid capital to cover the remaining cost. ROBS can bridge that gap, as well as be used as the down payment to secure seller financing.

The same process for how an SBA loan and ROBS work together holds true for seller financing. The only difference is instead of handing the money to the bank as a down payment, the borrower gives it to the seller. Approximately 80% percent of businesses for sale allow for some level of seller financing, so using ROBS for a down payment gives people access to a much greater share of the market.

BENEFITS OF COMBINING ROBS WITH SBA OR SELLER FINANCING

  • Fast Funding – You can gain access to your retirement funds in as little as three weeks. Once the ROBS transaction is complete, the cash can immediately be used as a down payment.
  • Larger Equity Injection – Using retirement allows for a larger down payment — reducing your risk as the lender and making your clients more qualified, confident borrowers.
  • Increased Buying Power – With a bigger down payment, borrowers have more options when launching or buying a business.

QUALIFYING FOR ROBS IS EASY
If you meet these simple requirements, you’re a great candidate for ROBS:

  • Funds in a qualified retirement account, including 401(k) (you cannot be currently employed by sponsoring company), traditional IRA, TSP, 403(b), Keogh, SEP (Roth IRAs do not qualify).
  • Over $50,000 in rollable retirement funds, meaning the funds must be able to be moved from one tax-deferred retirement account to another.
  • The company funded must be an active, operating company (cannot be a passive investment) that is set up as a C corporation.
  • The new business must sponsor a retirement plan, usually a 401(k).
  • The borrower must work in the business and take a salary.

There are no collateral or minimum credit score requirements to qualify for ROBS, so it’s an ideal option for many business owners, regardless of credit history.

GETTING STARTED
The first step in combining ROBS and SBA is to apply for an SBA loan. SBA loans do not come directly from the Small Business Administration. Rather, the SBA encourages banks to lend to small business owners with affordable terms and multiple loan options. In return, the SBA covers between 75 to 85 percent of the loan for the bank if the loan defaults.

Once qualified for an SBA loan or the terms on seller financing, it’s time to initiate the 401(k) rollover with a ROBS provider, such as Guidant Financial. ROBS allows entrepreneurs to use up to 100 percent of eligible retirement funds to buy a business or franchise without incurring tax penalties. Rather than investing in the stock market, owners can control their retirement savings and invest in themselves.

For over a decade, Guidant has helped entrepreneurs use their retirement funds to buy a small business or franchise through ROBS. While ROBS has many stand-alone benefits, when combined with traditional funding methods such as SBA loans, it can increase buying power while preserving the business owner’s personal savings. It’s ideal for those who can’t afford or don’t want to pay their down payment out-of-pocket. To learn more about Guidant Financial’s ROBS program, visit https://bit.ly/2xpP4Di.

About Guidant Financial
Guidant Financial helps business owners secure financing to start, buy or grow a business. An industry leader in business and franchise financing, Guidant works with new and existing entrepreneurs to identify, evaluate and deploy customized financing solutions. Their services include, but are not limited to, 401(k) business funding, SBA loans, unsecured credit, and portfolio loans. In total, Guidant has helped over 18,000 entrepreneurs in all 50 states to invest more than $4 billion in funds to start small businesses, resulting in more than 85,000 U.S. jobs created. Visit Guidant on the web at http://www.guidantfinancial.com.

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Stacia Kirby
Kirby Communications
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