The Franchise King Blog

Is It Getting Riskier To Use Your 401K To Fund Your Start-Up Business?

The human resources department over at the IRS (Internal Revenue Service) may be "getting busy," in the next year or so. Real busy. They made need to hire more agents to start checking paperwork submitted by folks who've used a portion of their 401K's or IRA's to start a business...

Are you thinking about using a portion of your 401K/IRA to start your new franchise business? Well, you're not alone.

One choice that is becoming increasingly popular is to use some of your retirement funds to finance a portion of your franchise business start-up.

Leonard Fischer, is an attorney, and is also the founder of BeneTrends, a company that specializes in employee benefit plans and the Employee Retirement Income Security Act (ERISA) of 1974. He has something called The Rainmaker Plan. (Aff link) To qualify, you must have at least one of these; (From the Benetrends website)

•      IRA

•      401 {K}

•      403 {B}

•      457 {For Government agencies}

•      SEP

•      Simple Plan

•      Annuity Plan

•      Defined Benefit Plan

•      Profit Sharing Plan

•      Cash Balance Plan

•      Money Purchase Plan

•      Rollover Plan

•      Employee Stock Ownership Plan

I've covered this topic several times in the past few years, and whenever I do, the comment engine gets pretty fired up. Like here, for instance; "Should You Use Your 401K To Fund Your Franchise Business?"

Well, the IRS's little engine that could may be getting fired up too.That's according to a recent post from Carol Tice over at AllBusiness.com.

Read "Tapping Retirement Money For Your Business? Be Careful" at AllBusiness.com

(I'm comfortable with these plans, as long as the paperwork is perfect, and the prospective business owner is in a good position to leverage his or her plan.)

Did you use a portion of your 401K/IRA to fund your business? Are you thinking about it?

The Lack Of Franchise Lending Is Still Rearing It's Ugly Head

Ugly. Head.

http://www.flickr.com/photos/tambako/3457063894/

Once in awhile, I receive an email or two from a loyal reader of this blog suggesting that I'm being rather negative, when it comes to my writing.

I think that I'm a realist. I think I report the facts. I think my posts and comments are reality-based.

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Would you rather that I spin things?

Maybe I should start every post I write with, "Franchising is the greatest business model ever invented. You just can't lose! Banks love the model, and it's easy to get a loan! Almost anybody can succeed as a franchise owner!"  

Yaddadedo, Yaddadedee, Blahbity Blahbity Blah.

From The New York Times;

"The big national companies that dominated franchise lending before the 2008 collapse have stopped or reduced financing. The remaining lenders — often local banks — have been more restrictive in their credit underwriting, and they have been demanding more collateral (like home equity), more cash liquidity, more experience in the industry and outside sources of income, like rental income or a working spouse." Read

How Do You Feel About Franchise Dating? (Part 2)

http://www.flickr.com/photos/stawarz/ / CC BY-ND 2.0

(This is the second part of a two-part series exploring a new type of what I call, "creative franchise financing.")

In Part 1, I shared that;

"Franchisors are having a bit of a challenge in the "getting new franchisees financed" area. FranEquity is certainly timing their new approach quite well. If anything, they've shown us a fine example of finding a specific need in a specific market, and then trying to fill that need. It's totally entrepreneurial. I love that."

And I do love the entrepreneurial part of this. What I don't love is...

How Do You Feel About Franchise Dating? (Part 1)

(From LIVING IISc 's Public Gallery)

Franchise what? Franchise Dating. That's what a new entry into the world of "creative financing" is calling their idea......their program.

Those of you who sometimes accuse me of being overly skeptical, and a tad negative, will love my feelings on this newest idea...

US Government Frees Up $21 Million For Small Business Loans; No Mention Of "Start-Up" Assistance

It's great that the US Government is trying to address the lack of lending by the banks for small business loans. It's been a major problem, and has hindered our economic growth.

The banks have gone from lending money to anyone that had a pulse, to what's happening now;

They're looking for ways to turn loans down. That is what's happening, folks.

In this Washington Post story, David Cho writes that "administration officials say helping small businesses get credit remains a top priority. It is a critical component of the strategy to address the nation's high unemployment. More than half of all U.S. workers are at companies with fewer than 50 employees. Without access to loans, many of these firms are laying off workers or shutting their doors altogether." Read

One thing is still missing;