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Business loans are not like loans for your car or house where you might be able to put zero money down or have the seller pay your closing costs. In actuality, opening or buying a business requires some financial “skin in the game” so to speak, and that’s where retirement funds often come into play for business owners who need a non-borrowed equity cash injection to go along with their loan in the form of a 401(k)/IRA Rollover funding plan.

This equity injection represents immediate access to funds above and beyond the loan amount and generally represent 10-30 percent of the loan amount. In a world where cash is no longer king and borrowers need funds, these retirement funds become the “down payment” or non-borrowed equity cash injection via these steps when the business owner or prospective business owner utilizing 401(k)/IRA Rollover funding:

  • Form a C Corporation – A C Corporation must be formed.
  • Create a 401(k) plan for the C Corporation – Next, determine what type of retirement plan you want to establish for the new business. Using a 401(k) plan is a widely-used retirement plan option for businesses in operation today.
  • Rollover funds from a personal retirement account plan to the company 401(k) plan – The transfer of your personal retirement funds to the company retirement plan must be done using funds not through your current employer’s plan (if you are still employed by another company and have not separated from that company). Once you separate from your current employer you can use your retirements funds for a rollover.
  • The new Corporation 401(k) plan uses funds to purchase stock in the C Corporation – The new retirement plan can now purchase stock in the new C Corporation.
  • Proceeds from the sale of the stock are used to start up a new business or franchise, purchase an existing business or recapitalize a business – The new C Corporation now has access to the funds it needs to launch and the journey of business ownership ensues.

Tenet Financial Group specializes in guiding its clients throughout the funding process – and throughout the life of their business – for numerous loan types including 401(k)/IRA funding, SBA loans, Equipment Leasing and more. Contact us today to speak directly with a senior consultant – 888-901-3335.