How funding your startup business with your retirement savings is not the best decision when searching for financing.
Is borrowing against your 401K smart? A common question and concern among today’s entrepreneurs, in a world where obtaining traditional bank business loans can seem somewhat impossible.
Startups are always a gamble especially those featuring a new product to the market, so I guess the first question to ask yourself is ‘are you willing to invest all your savings you’ve spent your working years achieving into something not guaranteed?’ Many might say ‘Of Course! This is my dream, this is what I have been saving for!”
In regards to the dreamers out there, it is possible to have your retirement funds self-directed into helping fund a startup business or the purchase of a franchise. With that process, you essentially would have full control of your investment, as well as no debt.
Sounds great right?
Well with every pro there is a con…or two. First off, it really depends on how much you actually have in your 401K to use towards your startup investment. Do you have a wealthy nest egg to sit on? Or would your investment be scraping the bottom of your retirement, clean?
Borrowing against your 401K can be very risky. Startup investments can easily eat away at half of your savings within the first couple months. Tapping into retirement is actually only really suggested if your business is being foreclosed on, evicted, or your company is battling debt with high interest rates. If your business does not apply to any of the above, then why take the risk?
Entrepreneurs and Business owners should consider alternative lending solutions before reaching into their savings for help financing their business. SBA loans, Bridge & Hard Money loans, as well as Unsecured Business Lines Of Credit are all alternative financing options for businesses when it comes to startup, growth, or even just making it over a financial crisis.
SBA loans obtained through a private investor have actually become increasingly more popular over the last 5 years. Due to the downfall in 2008, business owners are turning from the banks to private investors and lenders for a better opportunity at receiving funding and at lower rates too. Gold Beacon Capital Corp offers an array of different lending products for established or new business owners to obtain and use to help start or grow their business.
So the decision is ultimately yours, gamble your nest egg or put your trust in the hands of experienced investors who will guide your business to the financing you need to be successful. Whichever route you choose, take time weighing the pros and cons of each.