SBA Loans and 401k Business Financing (ROBS) FAQs

QUESTION: What is an SBA small business loan?

 

ANSWER: The Small Business Administration (SBA) doesn’t make direct loans to entrepreneurs or 401k plans to start or grow a business. Instead, it provides a guarantee to banks and lenders for the money they lend to small businesses owners. This guarantee protects the lenders interests by promising to pay a portion of the loan back if the business owner defaults on the loan.

QUESTION: Can I incorporate an SBA loan with the business financing 401k?

I am in the process of starting a new franchise business.  I have approximately $200,000 in a former employer 401k.  I have also been pre-approved for an SBA loan.  I am exploring using these funds in conjunction with an SBA loan as my business plan budget is $800,000.  Can I use a 401k Business Financing plan to pay the down-payment on my SBA loan?

ANSWER: Absolutely.  Our clients regularly use our 401(k) business financing plan in conjunction with an SBA loan – including using the proceeds of the ROBS 401K rollover as a “down-payment” to secure the SBA loan for their business.  In fact, the SBA guidelines contemplate that the borrower of an SBA loan could be a corporation that is owned by a 401(k) plan (i.e. a corporation that has been funded via a ROBS transaction).  In order to close on your loan, the SBA provider will require you to provide certain documentation.  As part of our services, My Solo 401k Financial will help you complete a number of items on this “checklist” so that you can close on your loan and fund your business as quickly as possible.

QUESTION: Do you work with SBA lenders?

 

ANSWER: Absolutely! We work with various SBA providers who provide SBA loans in all 50 states.  Moreover, the My Solo 401k Financial team is well-versed in the SBA rules that apply to businesses that are funded via our 401k Business Financing.  For those SBA providers who may not have much experience with 401k Business Financing, we regularly work directly with the SBA provider to help them understand the rules.  Moreover, we help our clients satisfy documents required by the SBA loan provider so that our clients can close on their loan in a timely fashion.

QUESTION: Do you assist with the SBA loan process?

 

ANSWER: Yes. We are well versed on the SBA rules that apply to businesses funded with 401k retirement funds, and we will assist in completing the “checklist” required to close on the SBA loan. Also, the SBA lender will request a special letter as it relates to the use of 401k funds to finance a business which we will provide.

QUESTION: If I elect to fund my business with a ROBS 401K and a SBA loan, are there any special considerations?

ANSWER: The My Solo 401k Financial team is well-versed in the SBA rules that apply to businesses that are funded via our 401k Business Financing.  We will work directly with you and the SBA provider in order to understand and comply with these requirements.  For example, you (rather than the 401k plan) will need to personally guarantee the SBA loan.  Moreover, if your business will own real estate, the real estate must be owned by the C-corporation which is funded with your retirement funds and which operates the business (i.e. the real estate cannot be owned by a separate entity such as an LLC which leases the real estate to the C-corporation).

MENU