Starting a business is an exciting journey—but financing it can feel like a maze. Many entrepreneurs turn to Rollovers as Business Startups (ROBS) to access capital from their retirement accounts without early withdrawal penalties or tax consequences. While ROBS is a powerful funding tool, combining ROBS and SBA funding or other financing options can be the key to launching and scaling your business successfully.
In this blog, we’ll explore how to pair ROBS with additional funding sources, when to consider alternatives, and how Benetrends helps clients build the right financial foundation.
The Power of Combining ROBS and SBA Loans
One of the most effective and popular funding combinations is ROBS and SBA (Small Business Administration) loans. Here’s how they work together:
- SBA loans typically finance up to 80% of your total project costs.
- Lenders require a 10% to 20% cash injection from the borrower.
- Your ROBS funds can cover this equity requirement, making it an ideal hybrid solution.
For example, if you have $150,000 in your 401(k) but need additional capital, you can roll over those funds and use them as your SBA loan down payment. This method minimizes the need for out-of-pocket cash and maximizes your access to low-interest, long-term financing.
Viable Alternatives for Non-ROBS Users
ROBS isn’t the only option. If you decide not to use retirement funds for your business, there are several other funding methods to explore:
- SBA Loans: Still one of the most accessible and flexible financing tools for small businesses.
- Unsecured Lending: A niche, fast-access option for those with strong credit.
- Angel Investors: Ideal for high-growth startups or those with innovative products/services.
- Home Equity Lines of Credit (HELOCs): Useful for individuals with substantial home equity seeking flexible capital.
Each method has its pros and cons. Benetrends can help you weigh which best suits your goals, timeline, and risk tolerance.
How to Decide on a Hybrid or Alternative Approach
When should you combine ROBS with another method—or skip ROBS altogether? Consider these factors:
- Your 401(k) balance: If it’s less than your full startup cost, pairing it with an SBA loan can fill the gap.
- Risk appetite: ROBS allows you to invest in yourself, while SBA loans offer structured repayment but add debt.
- Timeline: ROBS takes ~3 weeks to complete, while SBA loans may take 60–90 days—doing both simultaneously saves time.
Business owners often start with a ROBS consultation and then explore SBA loan eligibility to determine the most strategic plan.
Real-World Example: ROBS + SBA Success Story
One recent Benetrends client had approximately $150,000 in their 401(k) and needed an additional $200,000 to launch their business. They used the ROBS process to form a C Corporation and rolled their funds into the company’s retirement plan, which served as the down payment for an SBA loan.
While the ROBS process was completed in under three weeks, the SBA loan application took around 60–90 days. Because they ran both processes in tandem, the timing aligned perfectly and the ROBS funds were ready just in time to fulfill the SBA loan equity requirement. In the end, the client secured nearly half a million dollars in startup capital and successfully launched their business.
Whether you’re considering ROBS, SBA loans, or other funding solutions, the key is building a comprehensive and compliant strategy tailored to your financial needs. At Benetrends, we’ve helped thousands of entrepreneurs navigate their funding options and secure the capital needed to thrive.
Want to explore your funding mix?
Let our team help you find the best path forward—ROBS and beyond.
Adam Robinson, Funding Consultant
Contact Adam: https://www.benetrends.com/adam-robinson/