When it comes to franchise financing, there are several funding options that simply take longer than most entrepreneurs are willing to wait. Franchise buyers need fast access to cash to start on-boarding and building their new business.
Rollovers as Business Startups (ROBS) provide some of the most appealing benefits to entrepreneurs ready to get started sooner rather than later.
Rollovers as Business Startups
ROBS is one of the fastest means of franchise financing by taking your existing pre-tax retirement savings from a previous employer to invest in your new business.
ROBS mobilizes your pre-tax retirement savings without incurring early withdrawal penalties or other fees. It’s also not a loan against the retirement account, so you do not incur debt. ROBS is an IRS-approved method of taking equity and using that equity for franchise financing.
A 401(k) Rollover takes four key steps. First, your small business must be set up as a C-corporation with a new self-directed 401(k) plan under the business. Second, a designated amount of money is “rolled” from your existing retirement account into the new 401(k). Third, those funds are invested in your business. Fourth, this capital can now be used for all kinds of business expenses, including salary. In many instances, a 401(k) Rollover can be completed in as little as four weeks.
Some other benefits of 401(k) Rollover funding to buy a franchise include:
- Collateral is not needed
- No minimum credit score
- No repayment schedule
- Multiple qualifying accounts can be used (such as spouse’s or business partner’s account)
- 401(k), non-Roth IRA, Keogh, TSP, 403b, 457 and other pre-tax accounts qualify
If you need franchise financing quickly, Tenet Financial Group is here to help. We are an industry-leading Third-Party Administrator (TPA) with thousands of plans and happy clients to our credit. Our team understands all the intricate parts of plan design, installation and administration of 401(k) Rollovers. Contact us today to get started.