COVID-19 has certainly created a challenging time for American businesses. Many aren’t – or can’t be open right now – and most are struggling with expenses such as payroll, rent, utilities and benefits, to name a few.
Tenet Financial Group continues to answer questions and generally be a funding resource during this time period on topics like SBA Economic Injury Disaster Loans (EIDLs), SBA Debt Relief, and the SBA Paycheck Protection Program (PPP) loans. In general, the primary question is this: how can I gain access to working capital to keep my business afloat during this time?
If you have this same concern, here are some immediate options to consider that aren’t tied to the SBA or contingent on provisions in the CARES Act.
401(k)/ROBS Rollover Funding
If you have $50,000 or more in a pre-tax retirement account(s) like a non-Roth IRA, 403b, Thrift Savings Plan or Annuities, you have the option to “rollover” your retirement funds and use these funds to infuse cash into your business. This process is called a Rollover for Business StartUp or ROBS, and the name can be confusing. You don’t have to be a Startup business or franchise to qualify. Any for-profit business can utilize a ROBS funding plan to access working capital for operations. Rollover funding like this has been approved by the IRS since the early 1970s, so you can be assured it’s completely legal and financially-proven.
The benefits of Rollovers are numerous:
- Rollovers are tax-deferred and penalty-free
- Rollovers are not a loan, and therefore do not have to be paid back
- Rollovers do not require any collateral
- Rollovers are not a taxable distribution
- Rollovers can be used for any business expense
- Rollovers can be taken from multiple retirement accounts (think you+your spouse, for example)
- Rollovers are typically fast – 3-4 weeks from initial inquiry to cash in the bank
You are NOT borrowing money when you do a 401(k) Rollover, so you’ll often hear it referred to as debt-free funding. When using 401(k) funding, you can start your business with more equity from day one and less (and even possibly zero) debt – two incredibly attractive pros to consider.
If the above sounds appealing to you, contact Tenet Financial Group to discuss your options. There are several specific steps that must be followed to adhere to the letter of the law required for a 401(k) Rollover funding plans, and Tenet Financial Group specializes in this area.
Unsecured Lines of Credit
Unsecured Lines of Credit are another quick funding source – 3-5 weeks – for business and franchise owners. No collateral or financials are required, but the lender will be looking for a credit score of 680+ and no recent/no major derogatory events. Credit partners – such as your spouse or co-owner of the business – can apply together, and startup businesses do qualify for this funding type.
Unsecured Lines of Credit are pretty simple to understand: You withdraw the amount you need, only paying interest or fees on the amount you actually use, and you pay it back according to specific terms.
Tenet Financial Groups works with multiple lending institutions who assist our clients with Unsecured Lines of Credit. We can walk you through the benefits and any questions you have as part of our consultative-based process. We can help you with all the necessary documentation and paperwork to apply for Unsecured Lines of Credit, a really popular option for non-SBA-based funding.
Contact Tenet Financial Group
You probably have further questions and need to talk to someone face-to-face. Our team is ready to meet you where you are – from your home office, from the comfort of your couch, from your kitchen table. Reach out to our Senior Consultants at (888) 901-3335, Option 9 or click here to email us and schedule a virtual meeting today!