Is ROBS a Good Idea?

Post Date: November 28, 2022

The small business funding option known as ROBS, or Rollover as Business Startups, is a prime lending specialty of Benetrends. But the fundamental question of utilizing this option comes down to a simple query – is ROBS a good idea?

Before we begin, understand that this small business funding option involves tapping into your 401K retirement account, which requires careful consideration. Even if you do meet the requirements to participate in this financing option, it’s always advisable to check with your accountant and/or financial advisor to determine if ROBS is the right strategy for you.

What ROBS Is…

Rollovers as Business Start-ups (ROBS), is a small business funding option that allows the borrower to draw upon a qualified retirement account – without penalties, upfront taxes, or debt. A qualified retirement plan means any of these following accounts: 401(k), IRA, 403(b), PSP, or SEP IRA. Essentially, you’re using the funds you’ve saved for retirement to finance the startup costs of your small business. 

Ideal Candidates for ROBS Funding

Using retirement funds to finance the purchase of a small business isn’t mainstream, and even some savvy investors and entrepreneurs remain unaware that this this option is available to them. Rollover as Business Start-ups (ROBS) as an option can be advantageous, but it also doesn’t come without risks. If you’d like to know whether you’re an ideal candidate to pursue this funding option, here are three situational factors in which ROBS can be a helpful strategy:

  1. You Need an Alternate Finance Option – when entrepreneurs are just starting out, it can be a challenge to secure some of the more traditional financing needed to launch a new business. If your venture is brand new, and you lack adequate collateral, exploring alternate options like ROBS may be the solution
  2. Your Retirement Savings are Robust – entrepreneurs who have built up significant savings in their retirement accounts may be ideal candidates for ROBS funding, as there’s less overall risk
  3. You Want to Avoid Taking on Any Debt – if you’re a prospective small business owner with no interest in taking on any further debt than you must, ROBS can be an advantageous option. That’s because technically, the ROBS funding option isn’t a loan. That means there’s no repayment schedule. And you can’t exactly default on the principal if there are no payments to make.

About Benetrends

Benetrends is the authority in franchise and small business financing and is acclaimed for its Rainmaker Plan that enables entrepreneurs to use their qualified retirement plan to purchase, or recapitalize a business or franchise, tax deferred and penalty free. Benetrends originated 401(k)/IRA rollover funding, which has helped nearly 30,000 entrepreneurs in the last 40 years. In addition, Benetrends provides advice on a comprehensive suite of small business solutions including SBA Loans, Securities Backed Lines of Credit, Equipment Leasing, Commercial Insurance, Individual and Group Healthcare, Payroll Services and more. If you’d like to know more, simply reach out and contact us today!

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