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  1.  
  2. FUNDING SOURCES
  3. SBA Loans
  4. Need a Loan? Tap Your 401(k), Without Penalty – BusinessWeek
« Venture Capital Exit Times and Return on Investment (ROI)
Startup valuations come back down to earth – BusinessWeek »

Need a Loan? Tap Your 401(k), Without Penalty – BusinessWeek

2 Jan 2009   | SBA Loans

Tags: 401(k) · loans

LINK TO ORIGINAL ARTICLE:
  • http://www.businessweek.com/magazine/content/08_51/b4113064369970.htm

A cottage industry, made up of a few small companies and a bevy of independent contractors, has sprung up to help entrepreneurs turn their 401(k)s and other tax-deferred accounts into capital. The firms, which generally charge $4,500 to $7,500 for their services, are taking advantage of an unpublicized tax law that allows individuals to invest their retirement funds in a company.

Here’s how it works. An entrepreneur, aided by the outside adviser, creates a corporation. The newly formed entity starts a 401(k) plan, and an individual rolls over existing retirement funds into the account. Under 401(k) rules, the plan can purchase shares in the corporation—money that can be plowed into a small business that sells a product or service. Those deals are considered investments, which is the key. By investing the money rather than withdrawing it, entrepreneurs avoid triggering a penalty that amounts to 10% of the assets.

>>> READ MORE at:
  • http://www.businessweek.com/magazine/content/08_51/b4113064369970.htm
« Venture Capital Exit Times and Return on Investment (ROI)
Startup valuations come back down to earth – BusinessWeek »

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