business funding http://www.wisebread.com/taxonomy/term/13728/all en-US How to Start a Business With Your 401(k) http://www.wisebread.com/how-to-start-a-business-with-your-401k <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/how-to-start-a-business-with-your-401k" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/new_business.jpg" alt="Employees in front of a new restaurant" title="Employees in front of a new restaurant" class="imagecache imagecache-250w" width="250" height="170" /></a> </div> </div> </div> <p>While many people would scoff at the notion of using 401(k) funds for anything other than retirement, for the entrepreneur who absolutely MUST get a business off the ground immediately, there is an option to use 401(k) funds to start a business.</p> <p>There's a little known, but increasingly popular provision in the tax code referred to as the Rollover as Business Startup (ROBS). It allows someone to start up a new business venture with funds from an old 401(k) account without incurring the dreaded early withdrawal penalties meant to deter people from using their 401(k) accounts like piggy banks. Chances are, you might already have some retirement funds stashed in an IRA account as well. (See also: <a href="http://www.wisebread.com/4-reasons-why-a-roth-ira-may-be-better-than-your-401k">4 Reasons Why a Roth IRA may be better than a 401(k)</a>)</p> <p>There are various ways to structure the transaction, but if you engage an experienced and reputable accountant or tax attorney, they should be able to guide you through the recommended process for your particular situation. Given the potential complexities and tax liabilities if this isn't enacted properly, I haven't listed out step-by-step instructions. But it IS possible and legal, and thousands of Americans are doing it.</p> <h3>When Would Using 401(k) Funds to Start a Business Make Sense?</h3> <p>Tapping retirement funds for <em>any</em> endeavor requires careful consideration, but there are a number of plausible scenarios where one might actually be better off going the 401(k) funds route than other conventional means.</p> <h4>To Avoid Going Into Debt</h4> <p>If you're an entrepreneur who is going to pursue an idea no matter what, nothing will stop you, not even going into debt. So, rather than borrowing money at a high interest rate or using questionable means to gain access to capital (like peer lending or deferring payments from other mandatory sources) this might make more sense and keep you out of debt.</p> <h4>When You're Going in a New Direction</h4> <p>A common example in this economy might be someone who was <a href="http://www.wisebread.com/how-to-get-laid-off-a-step-by-step-guide">laid off</a>. Let's say you're a highly paid executive with a sizable 401(k) who was just laid off, and the odds of you finding work at a similar salary are quite low. Maybe it makes sense to take a new direction in life and start up a small business. With the right funding and opportunity, you may be able to parlay your experience and leadership into a better opportunity as a small business owner.&nbsp;</p> <h4>If You Have the Most Incredible Idea Ever</h4> <p>Of course, the history books are written by the victors, so we've all heard the proverbial stories about the entrepreneurs who mortgaged their homes and borrowed from friends and family to start businesses, and now they're multi-millionaires. This doesn't happen often, and most small businesses don't make the big-time. But if you have a unique business that really could take off and you don't have access to capital otherwise, this might be your best option.</p> <p>A decision to raid your 401(k) shouldn't be taken lightly, but when opportunity knocks, Americans often answer the door. We're an entrepreneurial bunch. If the opportunity is right and you have other means to fund your retirement, this might just be the mechanism to make it happen.</p> <p><em>Would you ever use 401(k) funds to start a business?</em></p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/darwins-money">Darwins Money</a> of <a href="http://www.wisebread.com/how-to-start-a-business-with-your-401k">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-1"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/the-step-by-step-guide-to-rolling-over-your-401k">The Step-by-Step Guide to Rolling Over Your 401(k)</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/7-ways-to-make-money-with-friends">7 Ways to Make Money With Friends</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/six-tips-to-good-business-management">Six Tips to Good Business Management</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/starting-your-dream-business-is-easier-than-you-think-heres-how">Starting Your Dream Business Is Easier Than You Think — Here&#039;s How</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/great-ways-to-generate-passive-income">Great Ways to Generate Passive Income</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Entrepreneurship Extra Income Retirement 401(k) business funding starting a business Wed, 08 Jun 2011 09:48:15 +0000 Darwins Money 565482 at http://www.wisebread.com 3 Alternative Sources of Funding http://www.wisebread.com/small-business/3-alternative-sources-of-funding <div class="field field-type-link field-field-url"> <div class="field-label">Link:&nbsp;</div> <div class="field-items"> <div class="field-item odd"> <a href="http://www.openforum.com/idea-hub/topics/money/article/3-alternative-sources-of-funding" target="_blank">http://www.openforum.com/idea-hub/topics/money/article/3-alternative-sources-of-...</a> </div> </div> </div> <div class="field field-type-filefield field-field-blog-image"> <div class="field-items"> <div class="field-item odd"> <a href="/small-business/3-alternative-sources-of-funding" class="imagecache imagecache-250w imagecache-linked imagecache-250w_linked"><img src="http://wisebread.killeracesmedia.netdna-cdn.com/files/fruganomics/imagecache/250w/blog-images/iStock_000002918766Small.jpg" alt="" title="" class="imagecache imagecache-250w" width="250" height="188" /></a> </div> </div> </div> <p>A recent American Express OPEN Small Business Monitor survey found that <a target="_blank" href="http://media.nucleus.naprojects.com/pdf/Spring_2011_Release.pdf">37% of small business owners expect to grow their companies this year</a>, with 35% planning to hire staff, and 44% expecting to make capital investments.</p> <p>Doing those things isn&rsquo;t cheap, however. Among respondents, 66% reported cash flow concerns, up from 53% six months ago. And 29% of those surveyed said access to capital has gotten tougher in the past six months. That could pose an obstacle to growth.</p> <p>What should you do if you can&rsquo;t afford to finance your company&rsquo;s growth out of cash flow? Don&rsquo;t overlook alternative financing. Here are some sources to consider.<b> </b></p> <h3>Community Development Credit Unions</h3> <p>To provide financing to businesses that lack access to the traditional financial services community, socially minded investors and lenders direct money into community development financial institutions (CDFIs), such as credit unions that serve low-income communities. The Social Investment Foundation Forum <a target="_blank" href="http://www.socialinvest.org/resources/research/documents/2010TrendsES.pdf">found that assets</a> in community institutions &mdash; including banks, credit unions, and loan and venture capital funds &mdash; rose by more than 60% to $41.7 billion in early 2010. If your business is located in an area that is underserved by banks, check out the website of the <a target="_blank" href="http://www.cdcu.coop/i4a/pages/index.cfm?pageid=1530">National Federation of Community Development Credit Unions</a> to see if there&rsquo;s a small business-friendly lender in your community.</p> <h3>Crowdsourced Funding Sites</h3> <p>Websites like <a target="_blank" href="http://www.kickstarter.com/">Kickstarter</a>, which let you post information about your business idea and seek startup funding from small donors, are proliferating. They can be an especially good fit if you&rsquo;ve built strong connections with contacts on social networking sites, because sites like Facebook make it easy to broadcast information about your financing campaign. Each crowdsourced funding site has its own milieu. Some cater to business types while others are focused on artists, musicians, and social ventures. In addition to Kickstarter, <a target="_blank" href="http://www.appbackr.com/">Appback</a>, <a target="_blank" href="https://www.profounder.com/">Profounder</a>, and <a target="_blank" href="http://www.33needs.com/">33Needs</a> may have the money you're looking for.</p> <h3>Peer-to-Peer Lenders</h3> <p>Even if you don&rsquo;t qualify for a small business loan from a bank, you may be able to<b> </b>borrow money from individual investors looking to get better returns than they might otherwise through sites such as <a target="_blank" href="http://www.lendingclub.com/home.action">Lending Club</a> and <a target="_blank" href="http://www.prosper.com/">Prosper</a>. Lending Club&rsquo;s site says rates start at 6.78% APR, while Prosper says they begin at 7.4%. Your credit score affects your interest rate, so if you&rsquo;ve been diligent about paying bills on time, you may find the deals on these sites attractive. Lending Club says it funded more than $16.5 million in loans in the past month.</p> <p>And if you've exhausted these three alternatives? Take a close look at your cash flow and your cost structure. Transforming fixed costs to variable costs and getting creative with vendors and like-minded small business owners (<a target="_blank" href="http://www.openforum.com/idea-hub/topics/money/article/market-using-your-grandfathers-business-model-barter-shira-levine">barter</a> for big savings) can free up some money for growth. You may not grow as fast as you might with a healthy investment, but you aren't giving up equity &mdash; or taking on more debt &mdash; either.</p> <br /><div id="custom_wisebread_footer"><div id="rss_tagline">This article is from <a href="http://www.wisebread.com/elaine-pofeldt">Elaine Pofeldt</a> of <a href="http://www.wisebread.com/small-business/3-alternative-sources-of-funding">Wise Bread</a>, an award-winning personal finance and <a href="http://www.wisebread.com/credit-cards">credit card comparison</a> website. Read more great articles from Wise Bread:</div><div class="view view-similarterms view-id-similarterms view-display-id-block_2 view-dom-id-2"> <div class="view-content"> <div class="item-list"> <ul> <li class="views-row views-row-1 views-row-odd views-row-first"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/250-tips-for-small-business-owners">250+ Tips for Small Business Owners</a></span> </div> </li> <li class="views-row views-row-2 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/4-inspiring-stories-of-normal-people-building-a-thriving-online-store">4 Inspiring Stories of Normal People Building a Thriving Online Store</a></span> </div> </li> <li class="views-row views-row-3 views-row-odd"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-to-make-money-with-peer-to-peer-lending-service-prosper">How to Make Money With Peer-to-Peer Lending Service Prosper</a></span> </div> </li> <li class="views-row views-row-4 views-row-even"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/5-investors-with-better-returns-than-warren-buffett">5 Investors With Better Returns Than Warren Buffett</a></span> </div> </li> <li class="views-row views-row-5 views-row-odd views-row-last"> <div class="views-field-title"> <span class="field-content"><a href="http://www.wisebread.com/how-i-got-over-the-hump-and-sold-my-blog-for-3-million">How I Got Over the Hump and Sold My Blog for $3 Million</a></span> </div> </li> </ul> </div> </div> </div> </div><br/></br> Small Business Resource Center business funding CDFI crowdsourced funding funding investors nontraditional funding peer-to-peer lending small business Sat, 30 Apr 2011 20:03:53 +0000 Elaine Pofeldt 528255 at http://www.wisebread.com