Financing a small business takes a lot of capital that many people don’t have immediate access to. Whether they need to purchase equipment, real estate, cover certifications, or pay for employee training, small business owners face numerous challenges getting their company off the ground.
Traditionally, prospective business owners attempt to find financing through business loan offices, but these may not always be the most appealing avenue. Be aware of the benefits of using rollovers to fund your business startup.
How Do Rollovers Work?
Rollovers as Business Startups (ROBS) provide aspiring business owners with the necessary funding. It’s taken from their own retirement funds, whether that’s through a 401k, IRA, or other retirement options. In essence, the business owner withdraws money from their retirement plan and rolls it over into their new business strategy.
Why Use ROBS To Finance a Business?
Not Having To Deal With Loan Offices
When working with conventional business loans, the business owner needs to negotiate the funding amount, interest rate, and term limit; each of these factors affects the success of the business strategy. Often, these contracts can limit the profits of a startup, either by excessive interest rates or offering an inadequate amount to finance operations.
ROBS enables the business owner to take the power of financing into their own hands, no longer limited by the contract drafted by a loan officer. It gives the startup owner the freedom to use any amount they’re comfortable with without answering to a third party.
When taking on other types of loans, owners take on significant amounts of debt—often in the hundreds of thousands or millions of dollars. Debt can significantly limit the earning power of a business; in the worst-case scenario, too much debt can sink a business before it has a chance to grow.
Rolling over retirement funds eliminates the need to take on this crippling debt, preventing owners from owing any amount of money to loan offices. When the burden of monthly payments is lifted, ROBS provides financial breathing room to promote early financial success.
No Withdraw Penalty
Accessing your retirement funds before turning 60 years old comes with a number of fees and penalties that will drain your money unnecessarily. However, ROBS allows the individual to remove the necessary funding without the risk of losing anything due to early withdrawal fees or additional taxes. Because of the lack of fees and penalties, the entire plan is open for you to use and free of charge.
Comfortably Fund Your Business
Using ROBS as a startup for small business funding is highly appealing. With it, you avoid incurring debt, have financial autonomy, and don’t have to lose anything to taxes or fees. While it’s not without its risks, it serves as a way to reliably fund a business endeavor without relying on third parties for support, giving the individual the independence they need to succeed. Know the advantages of rollovers to financing your business to give yourself that freedom to fund your business with no strings attached.