Statistics show that more than a million people start a new business each year in the United States. That number would be much higher if all would-be business owners had the money they needed to get started. Entrepreneurs are coming up with new and creative ways to fund their new businesses so they can realize their dream of being their own boss.
Leonard Fischer, President, and CEO of BeneTrends say that one of these new ways to get money is to use a person's existing retirement funds, such as a pension, profit-sharing plan, 401(k), or IRA. This lets a person start the business he or she has always wanted to without having to pay a lot of taxes or get into a lot of debt.
Under the Employment Retirement Income Security Act (ERISA), retirement funds can be turned into cash that can be invested or used to run a business. This way of getting money to start a business is approved by the Small Business Administration (SBA) for people who have more than $40,000 in a retirement account and are not working for the company that holds those funds.
You can use retirement money for any business purpose, such as
1. Buying a franchise or an already-running business
2. Start-up costs, like buying a building, equipment, etc.
Working capital includes money for salaries, franchise fees, and other costs.
3. Business growth, like paying for more franchises, stores, etc.
4. Equity for SBA loans or other loans.
It can be scary to think about spending money on your retirement. With this investment strategy, a person has more control over his or her retirement. Instead of relying on the stock market for small growth, the savings are invested in the person's own business. With this method, a person can often save more money for retirement than ever before.
"Today's entrepreneur has to deal with a lot of competition, complexity, and opportunities," says Dr. Germain Boer, Director of Vanderbilt University's Center for Entrepreneurship. This makes it more important than ever to start a business the right way. "This method of financing is a good choice for someone who has saved money in their retirement accounts."
The whole thing takes about two to four weeks and can be done by phone, email, fax, FedEx, or regular mail.
With the help of a knowledgeable employee benefits plan expert, starting a business is as easy as taking these four steps:
Step1: set up a C-corporation.
Step 2: The new company makes a plan for retirement.
Step 3: The money is put into the new retirement plan for the company.
Step 4: The stock of the company is bought by the new retirement plan.
"So many people have had to give up on their dream of owning their own business because they didn't have enough money. We help people reach their dreams every day by putting their own money to work, "says Fischer.
If you want to look into this new way to get money, you should talk to an expert who can help you through the complicated process.
