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Your 401(k) is an important piece of your financial future. But sometimes it feels like the money isn’t doing you much good when you are struggling to grow your business and it’s just sitting in the bank.

Fortunately, there’s an IRS-approved, penalty-free way to access your retirement funds to support your ventures. With 401(k) business financing, commonly known as Rollovers for Business Startups (ROBS), you can use your own money to invest directly in your business.

Why consider a ROBS structure for financing your business? Here’s why it’s the third most popular funding option for small businesses.

No penalties for using your 401(k)

It’s your money, and you deserve to use it how you want. With the ROBS structure, you’re able to use all of the money you’ve saved for retirement without paying the penalties for a full withdrawal.

You don’t need steep collateral

To securing 401(k) business financing, you don’t need to put up business or personal assets to secure the loan. To get started, you need at least $50,000 in a qualified retirement account like a 401(k), IRA or 403(b). 

Flexible terms

Unlike a traditional loan, you aren’t beholden to a lender’s repayment schedule. You don’t need to save up to make additional interest payments. You can make payments on your schedule. Your credit score won’t impact the loan because you don’t have to run a credit check. No down payment is required to get started, beyond having at least $50,000 in your 401(k).

Get your business in the black fast

With ROBS you can access the capital you need to start your business quickly with no taxes, no penalties and no interest. Without all the extra costs associated with taking out and repaying a loan, you can earn profits more quickly.

Have firmer control for your investment

When your retirement funds remain in your 401(k), your growth is subject to the stock market’s performance. With rumblings of another recession on the horizon, you want to take control of your money, especially as you grow your business. By putting your 401(k) towards your own business, you can more strongly influence how your funds grow because you directly control your business’ success.

Future employees are set up for a 401(k)

Obtaining funding via ROBS requires setting up a 401(k) for the business you want to fund. Whether you already have employees or think you may add some in the future, you can offer them the option of participating in the 401(k) plan. Many small businesses are unable to offer 401(k) plans to employees, which will make your business more competitive in retaining top talent.

Your 401(k) can help you secure a larger loan

The amount currently in your 401(k) may not be enough to help your business. If you need additional funding, but don’t have the collateral, you can use your 401(k) as a down payment on a Small Business Association (SBA) loan.

At Tenet Financial Group, we specialize in helping small businesses establish 401(k) business funding to meet their goals. Contact our specialists today to learn how you can invest in your business with your own funding.