Fund Your Franchise

By investing retirement funds into a franchise, 92% of Guidant clients fund in 21 days or less.

Thousands of entrepreneurs have discovered that purchasing one’s own business as a legitimate 401(k) investment can lead to less overhead and faster success. In fact, industry experts estimate that more than 10,000 small business start-ups have been capitalized in this way since 2005, and more than half of those entrepreneurs worked with Guidant Financial Group, considered the leader in “Rollovers as Business Start-ups” (ROBS). It appears that what was once viewed as a secondary option is recognized today as a reliable and intelligent way to fund a business.

For the average small-business entrepreneur, capital is virtually non-existent. Even the SBA loan is frustratingly elusive: Between January and June of 2010, there was a 27% drop in SBA loans. For today’s potential franchise owner, using money from their retirement accounts to finance all or a portion of their new business is their only funding option.

When completed by a provider intimately familiar with this type of transaction, franchise purchases can be surprising short. Guidant has streamlined the process to the point where 92% of their clients’ deals close in 21 days or less.  Perhaps this is stating the obvious, but time kills deals. Guidant’s efficiency means that franchisees start their business with little or no debt; franchisors can look forward to a franchise unit positioned for rapid success; and consultants/brokers enjoy more (and faster) financial rewards.

So how does it work? Foundational to this type of transaction it the fact that a 401(k) can legitimately hold both publicly and privately held stock. Using Guidant’s process as an example, the basic steps start when a private corporation is created for the new business.  Next, a 401(k) is created and then their existing retirement funds are rolled into the plan.  Then the new 401(k) makes an investment into the newly formed corporation.  Finally, the corporation, in turn, uses the investment proceeds to acquire a franchise or other small business, and the 401(k) becomes the shareholder.

Besides enabling the new franchise owner to avoid high-interest loan payments, this transaction enables them to grow their 401(k) retirement nest egg while they grow their business. There are additional advantages to this type of transaction. This includes, but is not limited to: the franchisee making a debt-free investment into their business; offering a benefit that is unavailable in small business today though the businesses new 401(k); using their retirement funds as a down payment for a larger loan; and obtaining capital without using their home or credit as collateral.

Because these transactions are fairly complex, working with a small or inexperienced firm can trigger substantial tax problems. Guidant has proven that it understands the importance of properly administering these plans, and it takes its role very seriously. Because of its expertise and reliability, Guidant Financial Group is the only business within this niche industry to have made the Inc. 5000 three years in a row. Not only does its growth demonstrates that more franchise consultants trust Guidant to help their clients fund a franchise, but it also points to an increasing reliance by small business on the ROBS form of non-traditional funding.

By being fully informed about this rich source of untapped capital, you can help put more of your clients into their dream business and help propel yourself into a higher tax bracket!

David Nilssen is the founder of Guidant Financial Group. In 2007, the Small Business Administration (SBA) named Nilssen the National Young Entrepreneur of the Year and the Puget Sound Business Journal named him one of the top 40 businesspeople under 40 years of age. In both 2008 & 2009, Ernst and Young named him a finalist for their coveted Entrepreneur of the Year award.
Visit Guidant Financial Online to learn more about Self Directed IRA, Real Estate IRA, Small Business Financing and SBA Loans.