Funding acquisition by borrowing from 401k

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November 30, 2022

by a searcher from Monash University in Miami, FL, USA

Hi SearchFunders!

I'm trying to think through taking a loan from my 401k in order to fund an an acquisition, and what impact that will have on credit approvals for the deal. Has anyone got any experience with this, or are there any brokers who would be willing to chat with me about the likely impact on credit approval?

Thanks!

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Reply by a searcher
from North Carolina State University in Sykesville, MD 21784, USA
You can only borrow $50K max and to borrow that much you need to have at least $100K in your 401K. This can be quite limiting. For myself, I went with the 401K ROBS. My thought process is documented in great detail here:
https://jordannovgrod.substack.com/p/personal-financial-statement
https://jordannovgrod.substack.com/p/equity-injection
https://jordannovgrod.substack.com/p/401k-robs
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Reply by a searcher
from University of Virginia in Richmond, VA, USA
I didn’t borrow from my 401k. Instead I did a rollover for business startup (ROBS). That cost about $5k to do two years ago. Point is that you may not need to borrow from your 401k at all. But note that if the target business currently has a 401k in place and you do a stock sale, the target’s must be dissolved before the sale. You can’t have two plans.

Also note that at least to my understanding a couple years back, if you do a ROBS I think your employees have to be able to buy into the plan’s stock in the company- or something goofy like that. I ultimately backed out of the ROBS entirely.
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