Use Your IRA to Start Your Dream Business

Many wanna be business owners are unaware that retirement accounts, even those with limited funds, can provide penalty-free down payments or operating capital to start your dream business.

 

If only… These two words have been the kiss of death to more people’s dreams of starting a business than any others in the English language.  If only I had money set aside to start a business, my life would be so much better.  With my own business, I’d be able to live my life free of the fear of being fired or laid off.  I’d be able to be free to think outside the box and direct my own destiny. “If only…” 

 

Well, if you have always dreamed of starting your own business, now there’s a way you to get your hands on the money that will allow you to live out your dream of business ownership. And the amazing thing is – you probably already have that money in your own possession.

 

If you have an IRA, 401(k), Keogh, SEP or other retirement plan, you’re sitting on a potential goldmine, because those funds can be used right now to either buy a business outright or to leverage a loan that will let you secure the enterprise of your dreams. Best of all, you can tap into those funds before retirement age without incurring additional taxes or early withdrawal penalties.

 

By using a structure similar to that of a “self-directed IRA,” your purchase of a business or franchise is considered by the IRS and Department of Labor (DOL) as an investment in your business made on behalf of your retirement account. That means that, because it’s an investment, the profits are realized tax-deferred in your retirement account – or you can reinvest them in your business. As your business grows, your retirement account grows, too. Buying a business in this manner can save you thousands of dollars in interest and taxes, and it can protect your personal credit as well.

 

But what if you don’t have enough money in your retirement account to purchase the whole kit and caboodle?  Your dream may still be within reach, because you can use what you do have to secure a loan and reduce your overall debt.

 

“The more you can put into a down payment for an SBA or other loan, the more favorably the lending institution will look on your request,” says David Nilssen, CEO of Guidant Financial Group (www.guidantfinancial.com), a leading financial services company that offers a 401(k) small business financing vehicle. “As a general rule, borrowers will need 20% or more down, regardless of whether they’re buying a new business or an existing one.”

 

Nilssen points out that entrepreneurs looking to minimize overhead or gain additional funding have other options, too, for purchasing their own business. “The same account structure that allows for IRA monies to be used as loan leverage also allows for multiparty purchases,” he says. “You’re free to combine your IRA money with the IRA funds of business partners. It’s also an ideal set-up for husband-and-wife teams.”

 

When using this financing strategy, there are some guidelines you need to follow. Primarily, you are required to: work on the business (whether on-site or not) at least 1000 hours yearly, divided up as you choose; pay yourself a salary; and offer your employees a 401(k) plan.

 

Because this purchasing strategy requires careful structuring of various accounts and entities, it’s not for the do-it-yourselfer. Fortunately, even though the numbers are fairly limited, there are retirement-account experts out there that specialize in setting up these unique financing vehicles.

 

“Although it’s growing remarkably fast, this is still a fairly new niche within the self-directed IRA industry,” says Nilssen. “So look for a financial services company with a solid history of structuring thousands of these types of accounts and enjoys a reputation for expertise and integrity in the industry.”

 

By combining your retirement account funds with your entrepreneurial zeal, you may discover the perfect recipe for business success!

 

Learn more about buying a small business with IRA funds or other debt-free financing options at www.guidantfinancial.com, or call 888.472.4455.

 

Listen to Guidant Financial Group’s Podcast at

http://www.businessopportunitynetwork.podango.com/podcast/3680/Money_Talks

 

Copyright © 2008, by Guidant Financial Group