401K Home Care Franchise Funding

Posted: December 1, 2019

Should I Use 401K Funds to Start a Home Care Franchise Business? It’s a question many ask every day. The economic rollercoaster has made it more difficult for individuals to find funding to start a business as financial institutions have become more reluctant to issue loans. With fewer options, many people hoping to start a business are seeking alternatives to traditional bank loans.

The days of lending to people with no assets, no income and/or no job are long gone (and for good reasons). Given the greater difficulty of obtaining funds, more people are considering tapping into retirement funds to launch a business. Is this a good idea? Let’s explore some of the advantages and disadvantages of tapping into a 401K to get a business off the ground.

Benefits of Using Retirement Funds

If you decide to withdraw funds from a retirement fund such as an IRA or 401K, how you do so is exceedingly important. A Rollover for Business Startup (ROBS) allows you to tap into retirement funds with no penalties or taxes. Compared to cashing out a 401K or IRA, which would result in a 10% early withdrawal fee, in addition to up to 30% taxation, using a Rollover for Business Startup is the wiser choice and, thus, has seen a dramatic increase in recent years.

Additional advantages of sourcing money from retirement accounts include:

Secure funds quickly—usually in just two to three weeks
Use the funds to pay yourself a salary during the start-up of your business
No interest on the loan, thus moving you closer to profitability sooner
Improved cash-flow situation from the start

Disadvantages of Using Retirement Funds

As with most loans, there are disadvantages to using retirement funds to start a business. The first concern is the risk associated with using funds previously set aside for retirement on a business that may not ultimately succeed. Additionally, your financial advisor may charge you several thousand dollars for the paperwork to process a rollover, in addition to fees for managing the new fund.

Make sure to do your research when considering whether to use retirement funds to start a business, as there are some considerable risks—you should know what’s at stake before you make any final decisions.

Always Best Care is one of the nation’s leading providers of non-medical in-home care, assisted living placement services, and home health care. The company delivers its services through a national network of over 200 independently owned and operated franchise territories throughout the USA.

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