Small Business Financing and Franchise Financing Blog

A Diamond in the Rough

Tuesday, March 9
In Entrepreneur Magazine’s February issue, one article highlights the different options a small business owner has should a bank pull their credit line (see What to Do When the Bank Pulls Your Line of Credit).

One interesting tidbit (and we mean tidbit) is the suggestion of considering retirement funds as a source of capital should unexpected occur. While retirement funds have always been considered off-limits, we are finding that more and more industry professionals are suggesting retirement funds as a source of cash.

Reporter Julie Bennett interviews Guidant Financial Group Cofounder David NIlssen, who says that, while retirement funds should not be used as a last-ditch effort to save a failing business, the pros of using this funding method include no debt and no monthly payments.

Sounds good, right?

Pursuing another financing method can make a lot of sense if the bank route didn’t go so well in the first place. And, with banks seemingly lending less and less, and credit lines being pulled more regularly, perhaps retirement fund financing could become more and more mainstream.

Small Business Success Equals Retirement Relaxation

Tuesday, March 2
In a recent article on CNN.com, reporter Eileen Zimmerman interviews a recently laid off corporate worker, Paul Cardosi, who used retirement account facilitator Guidant Financial Group to invest his corporate 401(k) into the purchase of a franchise (see Raiding the Retirement Fund to Keep the Business Afloat).
While the financing model itself is unique, so is the return Cardosi is already seeing on his initial investment.
Six months after making the initial investment, Cardosi’s business is up 200% from when it was sold by the previous owner.

“The 401(k) owns the majority of the business,” he told CNN. “I haven’t lost the money, I just invested it. When I sell, the money goes back into the 401(k).”

Now, how many of you can say your 401(k) just made a 200% return on investment?

We know that not many of us can.

Because the retirement funds are invested directly into the business itself, there is no expensive distribution and the retirement account stays intact – and, if your business goes well, it continues growing.

While the article itself leads off focusing on small business owners who took advantage of their retirement funds the old-fashioned – and expensive – way, it is interesting to hear that there are other ways to use the money already amassed in a retirement savings account for the benefit of a future business, and for the business owner’s future.