Using A 401(k) To Buy A Franchise: 7 Powerful Reasons

use your own dollars to buy a business

(This post about using a 401 (k) to buy a franchise, and is courtesy of Guidant Financial)

If you’re looking to buy a franchise and fulfill your dreams of entrepreneurship, your first thought may be that you’ll need a small business loan. But there are other ways to finance that new business; using a 401 (k) to buy a franchise is a popular option. Maybe you need a few reasons to consider using this franchise financing method.


Using A 401(k) To Buy A Franchise: 7 Powerful Reasons

1. Start a franchise without going into debt.
Using your retirement account to purchase or start a franchise means you don’t owe anyone—and therefore don’t have to jump through their payback hoops.

2. Don’t risk your home or other assets.
With a loan you’ll need to put your own assets up as collateral. Even with an unsecured loan you’ll need great personal credit, a solid business plan and years of earnings projections. Why not tap into the money you’ve already got and put it to work?

3. Investing in yourself puts you in control.
When you use your own money to invest in a new business, you’re in control. You call the shots. You’re the boss. Why dance to someone else’s tune?

4. Rolling over your 401(k) to start a franchise is completely legal—when done correctly.
Thanks to a law passed in 1974, it is absolutely legal to rollover your 401(k) for start-up capital to buy a franchise. As long as you follow these steps:

  • A new C-Corporation is formed. (Why a C-corp? Short answer—it’s the law);
  • New corporation sponsors a 401(k) plan;
  • New 401(k) plan purchases stock in a corporation—which can now purchase a business or franchise;
  • Existing retirement funds are rolled into new (401)k

5. No interest payments.
Just a reminder here, because it bears repeating. If you don’t owe, you don’t have to pay—either a principal amount or interest.

6. Put your profits back into the business.
Without loan payments hanging over your head, you’re free to put money back into your business. With the money you’re not forking over to a bank or other lender you can afford a great advertising campaign, or fresh coat of paint on the building, or a consultant. The possibilities are endless and they’re up to YOU.

7. Maximize your wealth by investing in your business.
Using a 401(k) to buy a franchise makes some people nervous. “But what about my nest egg?” Here’s the thing: when you leave your retirement money in someone else’s hands you give up control. And we’ve seen over the past decade that many large institutions aren’t concerned with average citizens and what they’ll live on in their golden years. The person who knows what’s best for you is you.

So on that note: Take charge of your own future. Use your 401(k) to better your life. Start the business you’ve always wanted. Be the CEO of your life.

Or, as The Franchise King® says, “Own What You Do!”

Use all…or one of those 7 reasons to buy a franchise using your 401 (k).

Go to Guidant Financial for more information. Make 2015 your year to be the boss.



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  • Barbara Weltman

    Yes, these are great reasons to use your
    401(k) to buy a franchise. There are, however, some negatives to consider, such
    as risking your retirement savings if the business goes under and triggering
    immediate taxation of funds in the 401(k) if you engage in certain prohibited
    transactions. A 401(k) is a great source of funding…but caution is advised.

    • The Franchise King

      Hi Barbara,

      Thanks for your insights. I always listen to what you have to say.

      I’m actually 100% okay with people using A PORTION of their retirement savings to launch a franchise business. The key is to do so in a low-risk way.

      I would never want anyone to bet the farm, but using a small portion…heck, it’s their money, is fine.

      I’ve had a few people fund their franchises in this way, and it’s worked out fine.