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ROBS Program Question: I am using ROBS 401k Business Financing in order to put $200k of my retirement funds as a down-payment on a $400K SBA loan to buy a business. I understand that stock will be issued to my ROBS 401K in exchange for the 401k funds invested in the business. Will I personally receive stock in exchange for personally guaranteeing the SBA loan?
No – shares will be not issued to you on account of the SBA loan since the loan is debt (not equity).
The SBA requires that an individual who uses a ROBS Program to fund their business with retirement funds must personally guarantee an SBA loan that is made to the same business.
For example, consider a scenario where one invests $200,000 via ROBS 401(k) business financing to obtain an SBA loan of $400,000. While some may believe that only 1/3 of the stock will be issued to the 401k on an account of the investment of retirement funds (e.g. given that 1/3 of the total funds raised comes from the ROBS 401K), this is not correct. Instead, the stock issued based on the cash invested not the debt. For example, if such person invested $200,000 from the ROBS 401(k) rollover and $20,000 from such person’s personal savings then 200,000 shares will be issued to the 401(k) for their benefit and 20,000 shares will be issued to such person personally.