SBA Loan for Rollover Business Startup ROBS 401k Franchise Transaction

QUESTION: 

I'm looking at purchasing a franchise and would like to roll my $55K 401K from my former employer using ROBS to help fund it. I then plan on applying for an SBA secured loan through a local bank for the rest. Also, the 401K has an outstanding loan of about $21,600 that I’d like to also keep in place.

ANSWER:

 If the franchise is a business that provides goods or services, the 401(k) Business Financing Plan would allow you to use your former employer 401(k) funds to finance the purchase of the franchise without paying taxes or penalties. You can also use these funds in conjunction with an SBA loan. I note that company's such as My Solo 401k Financial partner with companies that specializes in securing SBA financing for its clients. As far as the outstanding loan on your former employer plan: while a ROBS plan would allow you to transfer the former employer 401k loan, it is highly likely that your former employer plan administrator will not allow the loan to be transferred but instead will require you to either (i) pay off the loan or (ii) take the outstanding amount as a taxable distribution.

For more information regarding the ROBS 401k franchise funding retirement plan, CLICK HERE.