Using Your 401(k) To Fund Your New Business With No Tax Penalty

This is a sponsored post written by me on behalf of Guidant Financial for IZEA. All opinions are 100% mine.

As you become financially literate, you start to learn tips and tricks that the average person knows nothing about. One of our favorites is Rollovers for Business Startups – a way to use your 401(K) to finance your new business, with no tax penalty.

Here’s how it works. In 1974, the Employee Retirement Income Security Act was turned into law. The law made it possible for people with 401(K) plans (and other eligible retirement plans) to use money from their accounts to buy or start a business, with no tax penalty.

Today, Guidant Financial is the leader in completing these transactions. They have already helped more than 14,000 entrepreneurs secure financing through Rollovers for Business Startups (more than any provider in their industry), and as word spreads about this method of financing, more people are turning to it to finance their small businesses debt-free.

So why would someone use retirement money to fund a new business? Turns out, there are many reasons!

  • Rollovers for Business Startups create a quicker path to profitability. Retirement funds that are invested in the stock market might have returns of 6-10% each year (though some years are lower or contain bad losses). While there’s nothing you can do to improve the performance of a passive portfolio, there is much you can do to control a business. By using 401(k) Business Financing, which is not a loan, aspiring entrepreneurs can get their start, potentially, debt-free.  Since there are no monthly payments or interest rates involved, all earnings your business makes are 100% profit from day 1, creating wealth at a rate that often outpaces the contents of a traditionally invested 401(K).

  • A business that begins with Debt Free Financing is much less vulnerable and risky. Many new business owners who fund their ventures with traditional loans have to risk their own home equity or other property to guarantee the loan.  But with Rollovers for Business Startups, no collateral is necessary, and the entrepreneur’s equity can remain intact.

  • It’s an investment in yourself, not the stock market.

  • You can get this kind of Small Business Financing no matter what your credit score is, unlike loans from banks and other traditional lenders that have minimum credit requirements.

Many real people have used 401(k) Business Financing to start their business of their dreams, which seemed impossible without this method. Here’s one of Guidant’s successful clients:

To be eligible for 401(k) Business Financing, individuals must have $50,000 or more in a 401(k) or other qualified retirement account such as a 403(b), TSP, SEP, Keogh, Traditional IRA, 457 or Pensions. The rollable funds must be from a past employer, a current employer from whom the individual is about to part ways, or funds from a non-employer-based fund.

Rollovers for Business Startups don’t only apply to businesses started from the ground up. The program also provides tax-advantaged financing for existing businesses a person might buy, as well as franchises.

As the stock market becomes ever more erratic and uncertain, more individuals are deciding to take money from a retirement account to build a new business. It’s a remarkable solution that more people should be aware of.

We hope this information gives you options you didn’t know you had!

401(k) Business Financing

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