In the wake of recent economic conditions fewer banks offer traditional financing options to individuals seeking to start or buy a business. As a result, a multitude of crowdfunding websites have proliferated with the most prominent among these Kickstarter. Kickstarter provides individuals an opportunity to seek “rewards-based” financing rather than equity financing in that entrepreneurs offer “backers” a tangible reward such as a product, signed t-shirt, personal note of thanks, etc in exchange for financial support. As a result, Kickstarter tends to be more of a viable option for creative businesses or projects.
A website called Pawngo operates just like a traditional brick and mortar pawnshop and markets itself as a “safe” way to offer collateral loans of up to $1 million, without financial disclosures, and 4-8 percent interest rate. While websites like Pawngo offer individuals a quick and low-interest way to acquire cash, there is the risk that you won’t be able to pay back the loan and will lose your collateral. The National Pawnbrokers Association estimates that 15% of all loans are never paid back.
But, what if there was a way for you to obtain the financing you need without interest or penalties, with no required loan payments or need to pledge collateral, and without having to find other investors or “backers”?
The good news is that there is such an option. An alternative to these crowdfunding websites and non-traditional small business financing options, known as 401k small business financing or Rollover As Business Startup (ROBS), allows you to tap your retirement funds to start or buy your own small business or franchise. This funding strategy continues to gain popularity. It is estimated that 10% of recently sold franchises utilized the ROBS funding strategy. In a ROBS transaction, the entrepreneur or franchise owner launches his/her new business through a cash investment by their retirement plan and thus the new business is not responsible for monthly payments which accompany interest-bearing small business loans. Alternative funding strategies have emerged because the recession has made it more difficult for entrepreneurs to obtain traditional forms of credit. The ROBS funding strategy can offer you the chance to buy or start your own small business and do what you love while using money you may already have!
To learn more about this strategy please visit our ROBS page or call 1-800-489-7571.