In case you aren’t exactly clear on how to use your retirement dollars to fund your franchise, I’d like to go over the basics as well as clear up a few myths you may have heard. As the founder and president of CatchFire Funding, I’ve helped more than 1,500 entrepreneurs fund their small businesses and franchises through 401k rollovers.
Traditionally, an early distribution from a retirement account could cost you up to 50% in taxes and penalties; however, with our self-directed 401k funding program, you’re able to invest your retirement money into a new franchise without losing your hard-earned savings.
Under which laws? With CatchFire’s self-directed 401k program, you’re able to roll over your retirement funds under the ERISA 1974 guidelines.
So, how does the process work? With a 401k rollover, you’re investing your 401k funds into a franchise without having to take a taxable distribution. A 401k rollover could provide you with the necessary capital to fulfill your dreams of franchise ownership, penalty-free. What’s more, the process can allow you to go into business for yourself without the burden of loan debt looming over your head. That peace of mind is priceless!
And now, on to those myths. Below are the Top 5…
Myth #1: I will face huge taxes and penalties.
A 401k rollover is very different from cashing out your retirement accounts to fund a franchise. With a 401k rollover, first a corporation is created, then the business sets up a 401k plan. Next, up to 100 percent of your existing 401k money is rolled into the new 401k plan and directed to invest in your franchise. All tax and penalty free!
Myth #2: The only purpose of a self-directed 401k is to fund my business.
It’s not just about funding your business today, it’s about saving for tomorrow. While business ownership is a way to build wealth, it’s also a tax saving tool. Think of it as a long-term wealth-building plan.
Myth #3: Taking out an SBA loan is better than a 401k rollover.
Unlike SBA loans, rollovers do not operate on a debt model. They allow entrepreneurs to invest in a franchise without making payments, paying interest or having to adhere to a payback window. Added bonus: since self-directed 401ks put business owners in such a great cash flow position, they often have a much easier time securing an operating line of credit with banks.
Myth #4: It has nothing to do with employees.
As a business owner who is always looking for quality talent, one of the main reasons why you utilize a self-directed 401k is to attract great employees. When you have a 401k plan, the employee-related advantages are threefold: it benefits the employee’s experience, it attracts good employees, and it helps you retain them.
Myth #5: I should never touch my 401k.
Rolling your own 401k savings into a plan that invests in your own privately held corporation is a strategy that has many benefits; for example, it’s much cheaper than taking out a loan, and you don’t have anybody breathing down your neck. One major plus: it allows you to take your time building your franchise business with no immediate payments to a bank, or returns to an investor.
As with all things having to do with entrepreneurship, risk lies in the eye of the beholder. As Americans invest their retirement funds in other peoples’ businesses (as you do in the stock market), is it more or less risky than investing in their own franchise business where they have control?
If you’d like to learn more about the exciting advantages of our self-directed 401k program, don’t hesitate to reach out to me. I’d be glad to answer your questions, it’s what I’m here for!
President & Founder