"Rollover for Business Startups" (ROBS) Loan Financing (Searchers/Bankers)
July 10, 2023
by a searcher from University of Virginia-Darden - Darden School of Business in Charlottesville, VA, USA
I have been researching how to use my 401k balance to finance a chunk of a new acquisition. Any searchers have experience doing this? Or searchers that explored this option and decided against it for various reasons? I am also curious to get lender perspectives (pros/cons). I assume a ROBS loan can sit in between a senior loan and a seller note but not exactly sure. Thank you in advance for your thoughts.
from Drexel University in Philadelphia, PA, USA
https://www.irs.gov/retirement-plans/rollovers-as-business-start-ups-compliance-project
Guidant Financial requires minimum account size of $50k. They will get back to you immediately upon submitting your email, requesting to schedule a call. https://www.guidantfinancial.com/financing-solutions/401k-business-financing/
I haven't scheduled a call yet to speak with them.
My understanding is that it's not a loan, but an equity investment from your retirement account. Just like buying a private stock via your retirement account, except that you also benefit by it being your business you're buying stock in.
From what I've seen so far it also looks like the stock must be of a C corp. I have not verified if that's 100% correct.
from Eastern Illinois University in 900 E Diehl Rd, Naperville, IL 60563, USA
At the end of the day I think you need to figure out if retaining more ownership, even if that ownership is in a ROBS versus giving up equity to another third party makes sense. The fact the business is a C-Corporation can come with some other tax disadvantages. Again, as already said above, the ROBS ends up owning part of the business and the money goes in as equity, not as a loan.
If you have questions or need help with financing with a ROBS involved, we would be more than happy to assist you. I can be reached here or directly at redacted Good luck in making your decision.