Statistics show that more than one million people in the United States start a new business each year.
That number would be much higher if all the would-be entrepreneurs had the financing required to get a business up and running. In order to accomplish their dream of business ownership, entrepreneurs are finding new and innovative ways to finance their new ventures.
One of these new financing options is the use of a person’s existing retirement funds-a pension, profit sharing, 401(k), IRA-which allows that person to start the business he or she has always dreamed of without tax penalties, consequences or mountains of debt.
Funds can be turned into useable capital for business investments or operations. If a person has more than $20,000 in a retirement account and is not currently employed by the company that holds those funds, he or she qualifies for this Small Business Administration (SBA)-recognized approach to finance and start a business.
Retirement funds can be used for any business purpose. Could you use money for any of the following reasons:
- Purchasing a franchise or existing business
- Start-up expenses, such as purchasing property, and equipment.
- Working capital, including paying salaries, and franchise fees.
- Business expansion, such as funding additional franchises, and locations.
- Equity toward SBA or other loans.
Funding your business is as simple as these four steps:
Step 1: Establish a C-corporation.
Step 2: The new corporation creates a retirement plan.
Step 3: Funds are rolled over into the corporation’s new retirement plan.
Step 4: The new retirement plan purchases the stock of the corporation.
So many people have watched their dream of owning their own business go out the window due to lack of funding options. We help entrepreneurs, coaches, consultants, and services based businesses achieve that dream every day.
CEO’s of new businesses should be aware that most Start-up businesses do not reach a level of profitablility and cashflow for while. The accurate use of business lines of credit along with a great business idea and plan can kick start the process. Business Lines of Credit are very flexible tools that allow you to make payments out of th money you have set aside from your initial cash draw while you uild your business!
In the world of Business Credit, this is called seasoning money. Seasoning money means to set aside some of the cash you withdraw from your business lines of credit and place it into another account for future use.
Here are some great reasons to season money from your business lines of credit:
- keep money that can be used to repay the monthly payments on initial credit lines while you build the business
- have money available for salaries during business start-up
- Strengthen your balance sheet with good cash reserves
- Use cash as collatoral or leverage to secure new loans
- Cash cushion available for emergencies
The most powerfule way to leverage business credit is to use the cash from business credit lines to open accounts and establish relationships with small regional lenders. These local lenders are more likely to offer you lines of credit if you season money in an account at your local bank.