Two of my recent posts, Entrepreneurs Know No Age Limits and What Is The Best Business To Start?, filled my inbox with email and stimulated a lot of comments. Much of the comments related to securing funding. Therefore, I thought I would continue the discussion by sharing a creative funding option I recently discovered.
It’s no secret that funding a small business during these economic times can be pretty tough. SBA has increased the amount of guarantees available, and yet, banks are still very selective and slow in granting loans. VCs and Angel investors are swamped with business plans from thousands of entrepreneurs and it is very difficult to get their attention, let alone convince them to invest in your business.
In light of the funding crisis in America, many existing business owners are struggling to obtain funding and those who are finding it difficult to find a job have an interest in starting a business but can’t get the funding or are afraid of some of the obstacles in starting a business. So what is an entrepreneur to do?
I recently connected with Larry Carnell, Vice President of BeneTrends, to explore one creative option that may not be known by many people. This is not an option for everyone. It is targeted to those who have accumulated a substantial amount of money through a 401(k) and/or other pretax retirement funds. This group is typically made up of older business owners and would be entrepreneurs.
The Rainmaker™ Plan from BeneTrends helps you set up a company retirement plan for your current business or newco. Then you can “rollover” your current 401(k) into your new company retirement plan. At this point, the company retirement plan acquires stock in your company thereby providing necessary funding. See illustration below.
This resource addresses many of the concerns and fears of a typical entrepreneur.
- No Paycheck Phobia – BeneTrends enables you to pay yourself a salary from day one.
- Time to Profitability Fears – Debt or loan payments are a significant drain on a business’s ability to be profitable. There are no loan payments with this program often shortening the time to profitability.
- Fear of Risking Personal Assets (Savings, Home, Nest Egg): Since these are pretax dollars, the government assumes as much as 40% of the financial risk of the investment.
- This is more than a funding option – It’s a vehicle that can shelter hundreds of thousands of dollars in corporate profits and taxes, accelerate the accumulation of wealth, protect assets and provide a financial exit strategy benefit.
This plan has been approved by SBA in conjunction with SBA loans and IRS. SCORE has partnered with BeneTrends to make this option available to entrepreneurs.
The Rainmaker™ Plan allows you to invest in new businesses, purchase franchises, purchase existing businesses, and in some instances, raise capital for existing businesses.
If you would like more information on The Rainmaker™ Plan from BeneTrends, you can contact Larry Carnell at (770) 652-5393, larry@benetrends.com or through his LinkedIn page.
My personal advice is to be sure you have created a thorough business plan that you believe in prior to risking your retirement through debt or this plan.
I hope you find this information useful. If you would like to contact me, you can do so by emailing me at mike.clough@bestbizpractices.org or visiting my LinkedIn page.
Those that enjoyed this article, also enjoyed:
What Is The Best Business To Start?
Entrepreneurs Know No Age Limits
Securing Start-Up Capital in Today’s Financial Environment
Funding a Business with Credit Cards
Posted by: Mike Clough
