Business Funding Solutions
Traditional Funding
Utilize our network of traditional business and SBA lenders to get your business funded and running. Our application process will position you to present to all lenders, giving you the ability to get the best funding package available.
For companies and individuals seeking to:
401k Business Funding
The self-directed 401(k) plan allows you to invest your retirement savings into a business without triggering tax penalties. You are even free to invest in your own business.
The ability to obtain traditional lending to fund your business has become much more difficult in todays tight lending economy. Entrepreneurs can now open up additional business funding capital by taking control of their retirment funds and invest in something that they know and believe in with the 401k business funding plan.
STEP 1 | Form a Corporation
Our retirement specialists will form this corporation or work with your attorney during the formation process.
STEP 2 | Corporation Sponsors a 401(k) Plan
This unique 401(k) Plan has been designed to allow for investment into your corporation. The 401(k) Plan comes complete with a favorable determination letter from the IRS at no additional charge.
STEP 3 | Rollover to new 401(k) Plan
Our team will help you through the process of moving your retirement funds from your previous employer or IRA into the new 401(k) Plan.
STEP 4 | 401(k) Plan Invests in the Corporation
Your new 401(k) Plan purchases stock in the corporation. This 401(k) Plan now holds stock in the corporation and the business is debt-free and cash-rich from the sale of the stock. At this point, the corporation will now be able to purchase your new business or franchise.
An "S" Corporation is similar to a corporation in that it provides its shareholders with protection from liability. However, unlike a corporation, an "S" corporation is exempt from federal income tax. Instead the taxes are paid solely by the individual shareholders.
The advantages of using this program over other financing options are substantial both in regards to profitability and the success rate of new businesses. Some of these benefits are:
Debt Free – Cash Rich. Your retirement funds can be structured as an investment into the business, so there are no debts that increase your overhead. Instead of sending money to a bank in the form of interest payments, that money can be reinvested in marketing, staff or equipment that helps the business grow faster.
Invest In Yourself. Use your retirement funds to invest in a business where you determine the rewards; you control the success of your retirement investment.
Lower Your Overhead. Using retirement funds to start a business does not require bank loans or tapping into your home equity. Now the initial revenue your business generates can go into developing the business rather than paying off debt. Less debt means a quicker path to profitability.
Enjoy Tax-Deferred Savings. Paying taxes and penalties can minimize the amount of money available for you to invest. By avoiding unnecessary penalties and taxes, the 401(k) plan enables you to save more money for retirement.
Leverage Additional Funding. Using the Guidant 401(k) plan can decrease the amount of money needed, many still need or want to obtain additional funding. These added funds can potentially allow for the purchase of a larger or multi-unit business or franchise. Many clients use the 401(k) to fund the down payment necessary to qualify for an SBA loan.
Professional Expertise. Our process is staffed with a wide variety of professionals who can look at your unique situation from all angles. Our 401(k) business funding specialists are well-known in the industry, and complete hundreds or, better yet, thousands of these plans each year.
Reputation. Our specialists are not new to this service and have a great reputation with real-life experience. Count on a reliable and error free
Communications. Representatives are always available to answer your questions. A good rule of thumb is: the easier it is to communicate with the facilitator, the more secure you can feel about what is happening behind closed doors.
Success. A company growing with a large and growing clientele.
Conservative Approach. Hearing “yes” is not always in your best interest. There are companies out there that will, out of ignorance or greed, set up structures that enable you to purchase businesses that are not permitted or advised under the IRS or Department of Labor laws. Choosing a facilitator that will keep you away from any business deals that are even remotely questionable is a safer route to take. We encourage you to run your potential transactions past counsel and include this step as part of the facilitation package.
Customer Service. So what constitutes top notch customer service? Proactive Communication and Ongoing Support.
Turnaround. Set up your account in less than three weeks. Expect a clear and honest time estimate.
Value. Clear and upfront expectation on the costs of the program and what you are getting.
Finally, never lose sight of the fact that you’re dealing with your money, your business/franchise purchase and your success or failure. Go with a company that ensures that your money never leaves your authority, and that you remain the one who defines your future.
Is this a new concept? Why don't more people know about this?
This is not a new concept. For years, private companies have been able to utilize retirement funds as a source of business capital. Most financial advisors and stock brokers, however, are not made aware of these investment options because these investments do not provide a sufficient profit for the institutions they work for. Investment firms and stock brokerages do not want clients to move their funds outside of their companies where they would no longer be able to draw a percentage of your income.
Is this a loophole?
Not at all. The Employee Retirement Income Security Act of 1974 (otherwise known as ERISA) essentially passed the responsibility of retirement saving from the employer to the employee. This is a specific exception that makes the Employee Stock Ownership Plans (ESOP) of industry giants like Johnson & Johnson and Anheuser Busch possible. Similarly, the self directed 401(k) for small business investing program was built to enable small, private companies to utilize retirement funds as a source of business capital.
Why is this becoming more popular now?
The baby boomer generation has been forced to consider investment alternatives like the self directed 401(k) because they have had sufficient time to accumulate greater assets in their retirement accounts, and the stock market’s volatility makes security investments seem less than secure. During the past 10 years, the self directed 401(k) business investing process has gained significant consumer and professional acceptance and will continue its exceptional growth as more and more individuals look to take their retirement investments into their own hands.
Can I pay myself a salary?
Yes. In fact, as part of this process you will need to be an employee of your new business, providing a bona fide service; this not only gives you the ability to draw a salary, but actually requires you to do so. You must not draw compensation from your company before it opens for business and is actively engaged in the buying or selling of goods and/or services. Further, your compensation must come from revenue generated by the business and not from the proceeds of the sale of employer stock to the 401(k).
What is the maximum salary I can draw?
As an employee of your company you are entitled to draw a fair and equitable wage. Your compensation must be "reasonable" and you are strongly encouraged to employ an HR firm to conduct a salary survey or to utilize one of the salary evaluation sites available online.
What type of business can I purchase?
Almost any legal business or franchise, whether you are starting something new or buying an existing business, can be purchased through the self directed 401(k) program. A few restrictions exist that prohibit using the self directed 401(k) business investment program for a business that is deemed to be “solely the investment of capital” (such as creating a business where you would be loaning out your retirement funds to others).
What kind of corporation do I have to use?
The self directed 401(k) for business investing program utilizes a C Corporation (C Corp.) business structure to meet the compliance requirements of ERISA and Internal Revenue code. A Limited Liability Company (LLC), Partnership or S Corporation (S Corp) would not meet the statutory requirements necessary to operate this structure.
Do I have to offer the 401(k) to all employees?
Any employee that meets all of the eligibility guidelines for the 401(k) plan must have the option to participate in the plan. For information on Guidant's participation guidelines, contact our office.
Why should I utilize the 401k business investing program versus a traditional bank loan?
By utilizing your retirement funds as seed capital for your business investment you effectively avoid all debts, fees and interest payments associated with taking out a loan. This strategy greatly reduces your overhead, which can prove invaluable in the early stages of a business venture. Instead of sending money to a bank in the form of interest payments, that money can be reinvested in marketing, promotions, staff or equipment that will enable your business to grow even faster.
How much of my IRA can I use for my business venture?
In most cases, your entire IRA can be rolled into your new business venture.
Can my spouse or another close family member co-invest, work for the business, or otherwise be involved?
Yes; the exemption to “prohibited transactions” permits participation by any friends or family members.
Can I still use part of my retirement money to invest in your other product (the self-directed IRA LLC)?
Absolutely; many of our clients diversify their retirement plan’s holdings into many investments such as real estate, loans and tax liens.
Paul Malstrom followed this business strategy when he purchased a small storage facility in Vale, CO in 2005. Malstrom retired earlier that year after three decades with the Oregon Agricultural Department, and knew that he wanted to do something different. He also knew that he wanted a little more control of his retirement funds.
“I wanted to do something else with [my retirement funds], and so I drew out all of my retirement funds from the state of Oregon, rolled it into the IRA and then over to the 401K. It was a big jump for me, because I hadn’t done a lot of business just to make a living.”
Malstrom wanted whatever investment he made with his funds to allow him a working retirement, which would allow him to find a better return on his retirement funds until his wife retires from teaching school in 2011, at which point he plans to sell the business. This gave Malstrom a relatively small window before his established exit strategy, and so commercial real estate seemed to be one of his best options.
“Four years ago, the residential real estate market was really up and it was kind of scary. I thought I would try commercial real estate. Working with a realtor, I came across this business and it looked like it was something that I could grow. I bought the one unit here in Vale, then we picked up a second one later when we were in Ontario.”
This is especially true for those who are using retirement funds to buy a small business or franchise. All investments carry a certain level of risk, and small business ownership carries additional responsibilities. Careful due diligence and planning are essential to protect one’s assets and one’s family and to ensure that the investment provides more opportunity than burden.
Despite the heavy costs and the added responsibility, Malstrom is pleased with his investment and remains confident that it will pay off well in the long-run.
“I missed the fall on the stock market; I missed the fall in the real estate. The return has been good.”
The economic downturn has affected businesses large and small in every sector, and buying a small business or franchise can seem riskier than ever. Some small business owners who bought before the downturn and who remain optimistic about the future have good advice for business buyers. Gary Henricksen, owner of Vermont-based Mail Rite, is one of those owners who recognize the long-term benefits of business ownership, even in a tough economy.
Henricksen spent over two decades in corporate America in companies around the country. He had considered buying a small business for six years before actually taking the leap. Within those six years, Henricksen went through two mergers that completely changed or eliminated his position. After years of moving, he and his wife were eager to stay in place for once, and this was one of the primary inspirations for Henricksen’s decision to purchase Mail Rite, a print and mass mailing service, in 2007.
Henricksen’s views about the state of the market are quite practical. “I would say that part of it is that people are just happy to have a job and have stuck around in a more demanding environment without pay increases or bonuses.” Henricksen himself bought the company because he wanted more stability and control of his destiny, but he reminds potential small business owners that, “when you own your own business, you’re still subject to market forces, so you’re not completely in charge of your destiny.”
Having better control and more options when he decided to buy a small business were motivating factors in his choice to use the 401(k) Small Business Financing plan.
Regarding his experience with the 401(k) Business Funding plan, Hendricksen gives a highly positive review. “During the process, I felt that I got a lot of good guidance. It went smoothly and I felt that the cost was very reasonable, so to anybody who feels that they want to go down this path, I would definitely recommend working it.”
How many people enjoy paying bills and taking care of the myriad details of personal finance? Not many... but Alison Salisbury does, so the entrepreneur turned a personal skill into a thriving small business.
“I’m known as a daily money manager,” Alison says. “It’s a fairly new industry on the West Coast, but it’s much more common in the east. Daily money managers are like personal financial assistants: We help people pay bills, open and sort mail, reconcile check books, organize tax records... all the paperwork of running a household.”
Think of her small business as household financial administration; she does not offer financial planning or investment advice.
Instead of seeking to purchase a franchise or an existing small business, the entrepreneur set up her own company – even though it was her first foray into entrepreneurship and small business ownership. After graduating with an Art degree, she helped artists write grant proposals. Later she spent a number of years at MIT as a grants administrator for the Arts Council and then as the administrative officer for the anthropology and political science departments.
She did have sleepless nights early on, though. With the help of the 401(k) business funding plan, Alison bypassed traditional small business financing by using her retirement funds to invest in her business. “I can see that if I just keep doing what I’m doing I’ll not only pay that investment back but will also grow my retirement savings at a faster rate.”
Since household financial administration is a relatively new concept in her area, spreading the word about her small business is critical. She belongs to the local Chamber of Commerce, goes to Senior Roundtable networking events, and maintains a website. But much of her business is based on referrals from satisfied clients and professional organizers. “Professional organizers tend to focus on handling garages, closets – physical spaces – and they don’t want to deal with paperwork. So I’ll step in.”
“It’s funny. More often than not, I’ll get people organized and they’ll say, ‘This is great – I can handle it myself from here!’ Then a month or two later they’ll call me back to clean up the new mess they made and have me just take over.”
Having the small business owner “take over” pays huge dividends for some clients. Alison explains, “I just went through and categorized all of a client’s expenses for the last seven months. She had plenty of money but wasn’t watching her cash flow. She was bouncing checks and incurring charges and believe it or not she had paid $4,350 in bank charges in just seven months. Not only do I make her life easier – she was amazed by how much money I could save her.”
While the economic downturn has hurt some small businesses, it has created an opportunity for Alison. A number of clients turn to her because their income and investments have declined and they want to reign in discretionary spending and develop a workable household budget. “A lot of my clients,” she says, “realize that not only do they need to get their own spending in line, but they need to pass that skill on to their children. That, of course, dovetails perfectly with the curriculum I’m developing.”
“Sometimes I wish I had a normal job,” she continues, “but then I think about working for someone else and doing what they want me to do on their time... and I realize I love the freedom I have – I really love it.”
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