14 Tips for Choosing A ROBS 401k Business Financing Provider
TIP # 1 – Look for a that doesn’t pay referral fees to business brokers, etc. but instead passes on the savings to the client. The savings will typically amount to $1,000 at initial setup.
TIP # 2 – Look for a ROBS 401k business financing provider that doesn’t start charging a maintenance fee until the 2nd year as most ongoing compliance requirements don’t typically start until the 2nd year. This will often save you about $1500 over the first 12 months.
TIP # 3 – Be wary of a ROBS 401k business financing provider offering a discount in order to encourage you to sign up as this suggests that their standard price may be too high and may indicate a culture of sales rather than a focus on compliance. Moreover, any perceived savings may be quickly given back if the company charges monthly fees that will typically recoup any discount in just a matter of months.
TIP # 4 – Look for a ROBS 401k business financing provider that allows you to speak to their compliance officer and/or attorney when you first call so that you can get all the facts on Day 1 and not from a salesperson. If you ask questions and are continually placed on-hold in order to “find the answer” or “double-check with someone” it’s a good indication that the person you are speaking with is not well-versed in ROBS transactions.
TIP # 5 – Work with a ROBS 401k business financing Provider who is seeking to build a long-term relationship such as by having you work directly with the owners of the company from Day 1 instead of a salesperson who then passes you off to various customer service representatives who may leave the company and leave you left to build a relationship with someone else at the company.
TIP # 6 – Look for a ROBS 401k business financing provider that offers record keeping and ongoing compliance support as the regulatory guidance indicates that most violations occur in a failure to comply with the ongoing ROBS requirements.
TIP # 7 – Look for a ROBS 401k business financing provider that doesn’t force you to pay for the annual valuation by automatically including the valuation in their annual fee which then ends up costing from $1,200 to $1,500 annually. Instead look to use a ROBS provider that gives you the option to use your own provider or facilitating the valuation through a provider that offers the service for much less.
TIP # 8 – Avoid a ROBS 401k business financing provider who is trying to upsell you on other services that are not essential to the ROBS 401k transaction such as payroll, etc. – especially before you may have even completed the business financing transaction. Not only does this indicate that they are not 100% focused on completing the core service that they are paid to provide but it is also indicative of a company that is more focused on sales than ensuring that your business is funded as quickly as possible and in a compliant manner.
TIP # 9 – Look for a ROBS 401k business financing provider that proactively explains not only the initial ROBS requirements but the ongoing compliance requirements and costs before you even proceed with the transaction. This is important to ensure that you make an informed business decision and also indicates that the company is focused on your long term compliance and success over making another sale.
TIP # 10 – Look for a ROBS 401k business financing provider who explains how long the 401k business financing process takes from start to finish including how much time it takes for each step in the process. This will be especially important as you are trying to schedule other business transactions that are dependent on the 401k business financing (e.g., a closing, etc.).
TIP # 11 – Look for a ROBS 401k business financing provider that is well-versed in the process to transfer your money from your existing 401k, IRA or other retirement account(s) and specifically from the financial institution(s) holding your funds (e.g., John Hancock, Vanguard, Fidelity, etc.). Not only is it important to ensure that the funds are transferred in a manner that will not incur taxes or penalties but an experienced professional can also ensure a smooth transfer process so that the funds can be used to finance your business as quickly as possible.
TIP # 12 – If you are looking to access less than 50% of your retirement savings (not to exceed $50K) in order to start or fund a business with no full-time employees, look for a ROBS 401k business financing provider that also offers a Solo 401k as a Solo 401k loan for business financing may be a more cost-effective and simplified option for you.
TIP # 13 – Look for a ROBS 401k business financing provider who has 1000s of clients and 100% audit success rate as this is strong indicator of an excellent combination of experience and expertise.
TIP # 14 – Look for a ROBS 401k business financing provider who stands behind their offering with an audit guarantee including a commitment to pay for outside legal counsel in the event that your ROBS 401k plan is challenged.
Comments