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FUNDING SERVICES

We assist our clients in analyzing options to pay for the startup costs associated with any new venture and securing the right funding for their new business when needed. There are two main funding options for new entrepreneurs that need outside funding to aid in launching a new business.

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SBA Loans

The first and most popular funding option for new franchisees is securing an SBA loan. The SBA does not technically lend funds directly to newly formed companies. An SBA loan is a type of government small business loan that is issued by private lenders (such as a bank or credit union) but backed by full faith and credit of the U.S. government. The SBA offers several types of loan programs, including 7(a) loans, 504 loans and microloans.


It is important to work with a financial institution that specializes in SBA loans to increase your odds at approval as well as a quick disbursement of funds to your new corporation. We work with several SBA Lenders as well as consultants that can help you with business plan development (a pre-requirement of being funded by the SBA) and lender selection.

SBA 7(a) Loan Program

The first and most popular funding option for new franchisees is securing an SBA loan. The SBA does not technically lend funds directly to newly formed companies. An SBA loan is a type of government small business loan that is issued by private lenders (such as a bank or credit union) but backed by full faith and credit of the U.S. government. The SBA offers several types of loan programs, including 7(a) loans, 504 loans and microloans.


It is important to work with a financial institution that specializes in SBA loans to increase your odds at approval as well as a quick disbursement of funds to your new corporation. We work with several SBA Lenders as well as consultants that can help you with business plan development (a pre-requirement of being funded by the SBA) and lender selection.

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504 Loan Program

The SBA 504 loan program is intended to supply funds for asset purchases, such as land or equipment. Typically, the asset purchase is funded by a loan from a bank or credit union in your area, along with a second loan from a certified development company (CDC) that's funded with an SBA guarantee for up to 40 percent of the value of the asset--which is generally a loan of up to $1 million--and a contribution of 10 percent from the equity of the borrower. This financing structure helps the primary lender--the bank--reduce its exposure by relying on the CDC and the SBA to shoulder much of the risk.

SBA 7(a) Loan Program

The first and most popular funding option for new franchisees is securing an SBA loan. The SBA does not technically lend funds directly to newly formed companies. An SBA loan is a type of government small business loan that is issued by private lenders (such as a bank or credit union) but backed by full faith and credit of the U.S. government. The SBA offers several types of loan programs, including 7(a) loans, 504 loans and microloans.


It is important to work with a financial institution that specializes in SBA loans to increase your odds at approval as well as a quick disbursement of funds to your new corporation. We work with several SBA Lenders as well as consultants that can help you with business plan development (a pre-requirement of being funded by the SBA) and lender selection.

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ROBS Funding

The second type of funding for a new business technically is not “outside funding” at all, because funds come from the business owner’s retirement plan. Rollovers as Business Startups (or ROBS) allow you to invest your personal retirement savings into your new or existing small business on a tax-deferred and penalty-free basis. It is not considered a distribution from your IRA since your retirement funds remain invested, only now they are invested in your new company instead of stocks, bonds, mutual funds, or ETF’s. 


Through ROBS, you are legally allowed to roll over retirement assets from a previous employer’s retirement account (or an IRA) into a self-directed account that invests in your business. To do so, you must establish your new business as a C corporation, which then establishes a new 401(k) plan that can purchase private stock. After rolling your personal retirement savings into the new company sponsored 401(k), you can purchase stock in your business to inject it with capital.


One of the benefits of ROBS is that it is not a loan, so you do not need to pay the money back. The funds generated through ROBS can be used for any business-related expenses, including paying employees and yourself, for any franchise or other for-profit business.

Advantages and Disadvantages of Traditional SBA Lending

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Disadvantages vs. Traditional SBA Lending

  • Your retirement is at risk. Despite the potential payoff, this is a significant downside. If your business fails, say goodbye to the invested portion of your retirement nest egg.

  • You will lose out on the financial market’s investment gains. Since you are committing your retirement nest egg to finance a business, you will lose the potential gains from a rising stock market, the tax-deferred savings of 401(k) and IRAs, and the power of compounding as investments grow over a long period time.

  • You must operate as a C corporation. A C corporation is a more common business structure for larger companies. The tax implications differ from a sole proprietorship and a limited liability company, so it may not be a good fit for your business.

  • You will pay costly fees. Benetrends Financial and Guidant Financial, two leading ROBS providers, charge $4,995, plus a monthly 401(k) administration fee of $139, which includes assistance with filing IRS forms. These fees must be paid with funds outside of the ROBS transaction.

  • The risk of an IRS audit could be greater. While not common, some financial experts and 401(k) fiduciaries express concern that the ROBS could be of increasing interest to the IRS over the next decade.

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Advantages vs. Traditional SBA Lending

  • ROBS is an alternative way to finance your business. Lenders typically require strong personal credit, positive cash flow and collateral for loan approval.

  • Rollovers as Business Startups is an option for an entrepreneur who has built up sizable retirement savings but who may not otherwise qualify for a business loan.

  • No debt - A ROBS is not a loan. You do not have to worry about monthly repayments, late charges, incurring high interest fees or defaulting. Thanks to eliminating some of these debt-related costs, you can reinvest more of your profits into the business, which is critically important for a new business.

  • You will not pay penalties or taxes. Withdraw funds directly from a 401(k) or IRA before turning 59½, and you will get hit with a 10% early withdrawal penalty and face a distribution tax. You avoid those with a ROBS.