While we typically refer to them as 401k rollovers this type of funding can be achieved from a number of different retirement investment accounts. 401k rollovers allow you to invest up to 100% of your retirement funds into your own business without paying any early withdrawal penalties or taxes and are an extremely popular method for franchise funding. This can also help you meet cash injection qualifications for other funding sources such as SBA and unsecured loans. 401k rollovers can offer several advantages, including less debt which accelerates profitability, immediate salary for owners, employee benefits, and more. They can be achieved in as little as a few weeks. There are several reasons why it is better to use your 401k vs. savings or taking out a loan. First, the money in the 401k is pre-tax dollars. The money coming out of savings is after-tax dollars. And, if you opt for a loan, you will repay the loan with interest. Not so with a 401 rollover. Another good point is that using a 401k is great for an exit strategy: when the business is sold, all of the proceeds roll back into a retirement plan and is not taxed until distribution.
Often referred to as a “signature loan” an unsecured loan is simply a loan that’s extended to a borrower based on their good credit and requires no collateral. Typically to qualify for an unsecured loan a borrower will need a minimum credit score of 700, have no derogatory credit statements and have less than 40% utilization of current credit accounts such as credit cards and other lines of credit. Unsecured loans can be secured in as little as two weeks.
While the SBA (Small Business Administration) does not actually provide loans they will offer a loan guarantee on up to 90% of the loan to qualified borrowers making the loan more attractive and less risky to the actual lender. SBA loans can be a great method for funding your franchise. Most SBA loans can be secured within 60 – 90 days.