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401(k) Plan Financing

Published By Janet Gershen-Siegel at January 15th, 2021

401(k) Plan Financing

What is 401(k) Plan Financing?

You already know that your retirement funds are an asset. But did you know that you can use them right now? Do you have a 401(k) or an IRA or stocks? Did you know that you can tap that source of funding now? And you can do so without losing interest. You will not get in trouble tax-wise, either. Yes, it is possible to get 401(k) plan financing for your small business.

401(k) plan financing is not a loan. You will not have to pay an early withdrawal fee. And you will not have to pay a tax penalty.

You will put the money back, by contributing, just like you do with any 401(k) program. This means you will not lose your retirement funds.

What are Some of the Details of 401(k) Plan Financing? 

Our 401(k) plan financing offers a powerful and flexible way for new or existing businesses and franchises to leverage assets that are currently in a 401(k) plan or IRA. Or these are assets which are tied up in stocks. In as little as 3 weeks you can invest a portion of your retirement funds into your business. This gives you more control over the performance of your retirement plan assets. And it gives you the working capital you need for business growth.

Is the IRS Happy with 401(k) Plan Financing?

Absolutely! This is a 401(k) Rollover for Working Capital program. It is also known as a Rollover for Business Startups (ROBS), as the IRS calls it.

401k plan financing Credit Suite3 - 401(k) Plan Financing

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What Are the Tax Implications of 401(k) Plan Financing? 

Per the IRS, a ROBS qualified plan is a separate entity with its own set of requirements. The plan, through its company stock investments, rather than the individual, owns the trade or business. Therefore some filing exceptions for individuals, may not apply to such a plan. As always, it is going to be best to check with an expert.

What are the Specifics? 

This type of financing is not a loan against, your 401(k), so there is no interest to pay. It does not use the 401(k) or stocks as collateral. Instead, this is simply a movement or change of custodian.

How Do You Qualify? 401k plan financing Credit Suite2 - 401(k) Plan Financing

401(k) financing is quite easy to qualify for. You will not need financials or good credit to get approval. To qualify for 401(k) financing, all the lender will require is a copy of your two most recent 401(k) statements.

If your 401(k) has a value of more than $35,000 you can get approval. This is even with severely challenged personal credit. You can receive whichever percent of your 401(k) is “rollable” as financing.  In many cases, you can secure a low-interest credit line or loan for 100% of your current 401(k) value.

Keep in Mind…

The 401(k) you use cannot be from a business where you are currently working. So it will have to be from older employment. You cannot be currently contributing to it. Your 401(k) must have at least $35,000 in it.

401k plan financing Credit Suite3 - 401(k) Plan Financing

Demolish your funding problems with 27 killer ways to get cash for your business. Get money even during the worst of a recession.

What if a Business Owner Has Credit Issues Now? 

Our 401(k) financing program is perfect for business owners with credit issues. Because lenders are not looking for, nor do they require good credit to qualify. Approval can happen regardless of personal credit quality. You can get approval even if you have recent derogatory items and major collections on your credit report. This is one of the best and easiest business financing programs in existence. You can qualify for and get really good terms even if you have severe personal credit problems.

How Soon Can You Get 401(k) Funding? 

The only documents the lender wants to see are your 401(k) statements. The last full statement should be one of them. After the lender reviews your 401(k) statements, you can receive your initial approval and funding in 3 weeks or less. You can get a working capital credit line to use for whatever purposes you want.

What are the Benefits? 

You can get 24-hour preapproval. And you pay no penalties for the roll-over. It is just an easy 401(k) review for approval. Plus you pay no application fees.

You can get approval with poor credit. Go from application to funding in 3 weeks or less. This form of financing reports to the business credit reporting agencies. Therefore you can build business credit while you pay back your 401(k) financing!

Set up a 401(k) plan in your company, and then invest your 401(k) in it. Your company becomes cash rich, and debt-free.

You will work with a CPA. They will help you roll over a non-contributing and qualifying account. This allows for cash out of half, or $50,000, whichever is lower.

If applicable, the CPA you work with will structure a self-directing IRA for the remaining funds. You will get a 5 year management and consulting service for your corporation.

What are the Terms? 

The terms are 5 years, and the cost is 1%. You will pay $4995 for a lender fee for the 401(k) option. So this includes 5 years’ worth of management and consulting.

But is it Legal? 

Absolutely! Under ERISA (the Employee Retirement Income Security Act), the burden of building retirement assets has undergone a shift from the employer to the employee. As a result, you can be younger than 59 ½, and you will not have to pay an early withdrawal fee.

401(k) financing is an excellent opportunity to invest in yourself. By using 401(k) plan financing, you are investing in a company you control. Its fortunes are in your hands. Your employees can use the new 401(k) plan, too. So you can help them take care of their own retirements.

With 401(k) financing, you will be able to enjoy the success of your small business today. And you will be able to enjoy it again in the future when you retire.

401k plan financing Credit Suite3 - 401(k) Plan Financing

Demolish your funding problems with 27 killer ways to get cash for your business. Get money even during the worst of a recession.

Why is 401(k) Financing Better than a Distribution? 

Unless you are 59 ½ years old, you will be paying an early withdrawal penalty. Yes, you would be paying to use your own money. So, you never want to get a distribution!

Why is 401(k) Financing Better than a Loan from Your 401(k)? 

But if your plan allows for loans, the IRS will only let you borrow up to 50%, up to $50,000, before you have to start paying taxes.

Of course with a loan, that means you would be paying interest. Again, you would be paying to use your own money. Plus, not every 401(k) plan so much as allows for loans.

So the bottom line is that 401(k) financing is a unique program. This program allows you to tap into your existing retirement account, with no penalties or taxable distributions. You can use those funds for business. This financing option avoids loans, banks, or credit checks.

401(k) Plan Financing: Takeaways

Investing your 401(k) or IRA money or stocks in your business can be a smart way to fund a company. You pay no interest and create a retirement plan in your business at the same time. This setup is perfectly legal and the IRS definitely allows it. We can help you use your 401(k) to fund your business. Just ask us how.

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