Small Business Loans
(The benefits of using an Individual 401k loan as a small business loan)

Small business loans are often necessary to provide capital to finance the startup of a business, to provide needed cash for short term business needs, or to provide capital to grow and expand your business.

Small business owners, entrepreneurs and self employed individuals owners often receive high interest rate loans and experience difficulties when trying to qualify for small business loans through banks and lending institutions.

Small business loans are fast, easy to obtain and have favorable interest rates when utilizing the loan provision available in an Individual 401k.

What are the advantages of using an Individual 401k loan as a small business loan?

The proceeds from an Individual 401k loan can be used for any purpose, there are no income or credit qualifications to receive the loan and interest and principal is repaid to yourself. Using your Individual 401k's balance as collateral you can borrow up to 1/2 of the total value of your Individual 401k up to a $50,000 maximum.

Eligibility

You are permitted to setup an Individual 401k provided you are self employed and have no full time W-2 employees other than a spouse. You are eligible to establish an Individual 401k for a side business even if you participate in a 401k, 403b or 457 plan through your primary employer. Sole proprietorships, S and C corporations, partnerships and LLCs qualify.

Favorable small business loan repayment terms

Small business loans using the Individual 401k have a 5 year maximum repayment term. Individual 401k loans used for the purchase of a primary residence may extend the loan repayment term up to 10-15 years. Loans are repaid according to the loan amortization schedule which is provided when a loan is initially created. Failure to repay the loan according to the loan amortization schedule may result in a loan default causing taxes as well as IRS penalties. Loans are not permitted with other self employed retirement plans such as a SEP IRA, SIMPLE IRA, or Keogh plans.

Small business loan payments are made monthly or quarterly to your Individual 401k. The interest rate charged on the loan is very favorable. Generally, the loan interest rate charged is the Prime Rate or Prime plus 1% or 2%. The interest rate depends on the Individual 401k provider.

What is the process to secure small business loans using an Individual 401k loan?

1. Setup an Individual 401k
   You are permitted to setup an Individual 401k provided you are self employed and have no full time W-2 employees other than a spouse. You are eligible to establish an Individual 401k for a side business even if you participate in a 401k, 403b or 457 plan through your primary employer. Sole proprietorships, S and C corporations, partnerships and LLCs qualify.
   
   
2. Rollovers and Transfers
   You can rollover your 401k, 403b, 457 retirement plan from a previous employer. You can transfer a Rollover IRA, Traditional IRA, SEP IRA, Keogh etc. into your Individual 401k. By consolidating your existing retirement accounts into an Individual 401k you build the 401k's balance quickly and then can use its value as collateral to receive a larger small business loan.
   
   
3. Submit a Loan Request Form
   Once the retirement assets have been transferred into your Individual 401k for 10 business days, you are immediately eligible for a loan. You are permitted to receive a loan up to ½ of the total 401k value up to a maximum of $50,000.
   

Learn more about how to obtain small business loans using an Individual 401k loan.

   Need Help or Advice?  |  Open an Individual 401k

Disclosures:

*  The information on this page is for informational purposes only and does not constitute, and should not be construed as, professional, legal or tax advice. To determine your individual tax situation and specific needs, please consult a professional tax advisor.

* Information contained in these sections merely highlight some benefits. There are risks involved with all investments that could include tax penalties and risk/loss of principal.