Small Business Financing and Franchise Financing Blog

Down Payment for SBA Loan

Friday, January 15


SBA loans are difficult to obtain in the first place. Combine this with the fact that once you do secure your SBA loan you will need to provide at least 20% cash down and it is no wonder that many prospective small business owners don’t even consider SBA loans as a viable financing option.
What many entrepreneurs do not know, however, is that the Guidant 401(k) Small Business Investment Program can be used to provide the down payment for your SBA loan from your existing IRA or 401(k) accounts, tax and penalty free.

This program is different from a loan against your 401(k) plan or a private note against the assets in your retirement plan. The Guidant 401(k) enables you to directly invest your retirement funds into your own business – as an equity partner. Just as it can buy stock in publicly traded companies, your IRA or 401(k) can invest into your privately held business (when done correctly!).

What many people don’t realize is that the cash they need to inject as the initial down payment for their SBA loan may already be in their possession. In fact, many SBA lenders and SBA sponsored programs recommend that people consider the Guidant 401(k) to secure the required cash investment to proceed with an SBA loan. This can be a much better alternative to taking a distribution and paying the early withdrawal penalties and taxes. Unfortunately thousands of people, who don’t know they have a potentially better option, take the distribution and pay upwards of 40% to the government! It’s simply not necessary.

Guidant has worked with numerous SBA approved lenders and SBA sponsored programs, like SCORE, to provide entrepreneurs with an alternative to mortgaging properties and cashing out retirement plans at a severe penalty to meet the down payment requirement.

Do you have money in a traditional IRA or 401(k)? Are you hoping to secure an SBA loan, but are unsure about where your good faith cash is going to come from? Or, are you hoping to obtain a larger SBA loan, but only have enough liquid capital to meet part of the cash requirement?

Call us. You may already have the money you need – you just don’t know how to access it yet.