How can I fund a business with retirement funds?

Rollover for Business Startups (ROBS)

The ROBS program is the most widely used way to fund a franchise both for the tax benefits and availability of funds that were thought to be inaccessible.

Simply enough, ROBS allows you to do a a 401(k) or IRA rollover just as if you were switching companies or plan carriers but instead of investing in publicly traded shares, you can buy shares in your own business. Because your funds are still being used for retirement you do not see any early withdrawal penalties or taxes. This strategy also allows you to reduce or have no debt when investing in a business because it is NOT a loan. There’s no debt to repay or interest because it’s your money.

Here’s how it’s done:

  1. Corporation in your name formed
  2. 401(k) for your corporation is created
  3. Perform a rollover into your new corporations 401(k) plan
  4. Your plan purchases stock in your company
  5. Your company can now use this money to purchase a franchise

Depending on your investment strategy, you may choose to fund the entire business through retirement funds or only a portion for a down payment for an SBA loan (more common).

Semfia does not do business financing but we have a great network of professionals to refer you to.

If you have more than $50,000 in retirement funds, we encourage you to spend two minutes to get personalized business recommendations or schedule a complimentary 15 minute consultation.