3 Tips for Opening a Franchise With Rollover Financing

If you’re thinking of investing in a franchise to get your feet wet in the world of business ownership, consider using your 401(k) retirement account as a source of capital. A ROBS, or Rollover for Business Startups, is not a loan—it’s a financing method that allows you to roll your funds into a new account while bypassing withdrawal fees. As you open a franchise with rollover financing, use these tips to ensure that the process is smooth.

Make Sure You Have Adequate Funds

In order for your 401(k) Rollover for Business Startups to work to your advantage, you’ll need a healthy nest egg stashed away. ROBS financing is a viable option for aspiring business owners who have more than $25,000 vested in their retirement accounts.

Good To Know:

If you need a great deal of startup capital and don’t have $25,000 in your 401(k) yet, consider joining forces with a partner, friend, or family member. They can roll their 401(k) into your new business’s retirement account as well to provide more funding.

Partner With a Business Expert

Before you begin the ROBS process, seek financial advice from somebody with more experience in small business ownership. Having a business mentor on your side will benefit you greatly in the early days of your franchise. You’ll know which common mistakes to avoid, and you’ll receive tailored advice based on your unique personal and financial circumstances.

Create a C Corporation

Once you buy into a franchise business, you’ll need to set it up as a C corporation in order to execute your 401(k) rollover. The rollover process is easy – just follow these 4 simple steps:

  • Establish your business as a C corporation.
  • Create a new 401(k) retirement account for the business.
  • Roll over your existing 401(k) funds into the new retirement program.
  • Purchase stock in your C corporation with the rolled-over funds.

Once the rollover is complete, your funds will be available for use in your new franchise business. Make sure you’re only using that money for business purposes to stay in compliance with IRS regulations.

Want to open a franchise using rollover financing? With adequate funds and top-tier financial advice on your side, the process can be easier than you think! Use these tips to complete your rollover and start your new franchise business on solid financial standing.

Wondering about the other franchise funding options available to you? Use Pango Financial’s funding solutions tool to learn more about small business financing.