Now may be the perfect time to consider utilizing qualified retirement funds to capitalize on your dream of business ownership. Thousands of entrepreneurs have chosen to use Rollover for Business Startup (ROBS) to start their business tax-deferred and penalty-free. To find out if this is the best solution for you, lets review the advantages and disadvantages.
Advantages
ROBS is a great funding strategy in any environment, but it is particularly beneficial during downturns and periods of uncertainty. The advantages of ROBS include the following:
- Starting your new business without debt can allow you to reach your break-even point sooner.
- ROBS plans are tax-deferred and penalty-free.
- There is no risk from collateralizing your home, which is required for many SBA loans.
- ROBS plans allow you to invest in yourself rather than the stock market.
- Credit score is not a factor in the ROBS approval process.
- ROBS plans allow for the flexibility of using the funds as down payment for a loan.
Trade-offs
Every funding strategy has trade-offs, including ROBS. However, the trade-offs for ROBS plans are not unique to downturns or recession. They include the following:
- Using your retirement funds to invest in your own success is a great strategy, but the risk it carries is not for everyone; retirement funds cannot be recovered if the business is unsuccessful.
- ROBS plans entail that your business must be operated as a C corporation. Although C corps have many advantages, the guidelines are more complicated than for S corps or LLCs.
- Third Party Administration is required to meet stringent IRS regulations. This makes it critical to partner with an experienced plan administrator.
Rollover for Business Startup (ROBS) is a unique funding strategy that works for many entrepreneurs in varied economic climates. Although this strategy seems complex, it is very simple if you work with an experienced ROBS provider to establish your C corp, facilitate your plan, and take care of ongoing administration.
– Sherri Seiber, Chief Operating Officer for FranFund
FranFund: FranFund designs flexible funding plans that help new and experience business owners fund their franchises. We have a powerful and accurate pre-approval process. Our former bankers analyze a candidate’s financial situation the same way a lender would, and we have a 99% success rate in obtaining loans for borrowers who received FranFund pre-approval! We offer ongoing support and make sure our clients know all of their options for funding single units through multi-unit expansions including SBA loans, conventional lending, and retirement plan funding with a risk-free SafetyNet® option. For more information, contact Sherri Seiber: sseiber@franfund.com