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Searching For Capital? Use Your 401(k)

Funding options allow owners to invest, rather than borrow, from their 401(k) funds.

Searching for capital? The New York Times' You're the Boss blog suggests an option--using your 401(k) to invest in or purchase your small business (as opposed to taking a loan from your retirement funds).

These methods let small business owners roll over funds from a 401(k) to purchase shares of their own company, or even buy a small business, the Times explains--and because this method of funding doesn't operate on a debt model, individuals can make small business investments without paying interest or dealing with a payback window.

This kind of funding option has become more popular amid the current squeeze on capital, the blog notes: Inquiries at Guidant Financial, in Bellevue, Wash.--which specializes in alternative small-business financing--jumped 196% between 2009 and 2011, the Times reports.

One caveat: Be sure to use an accounting specialist, since these plans need to comply with both IRS and ERISA law.

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Last updated: Jun 13, 2012

CAITLIN BERENS | Staff Writer

Caitlin Berens writes about business innovation and entrepreneurs. Before Inc., she worked at Billboard, SELF, and Better Homes and Gardens. She attended Drake University, and lives in Brooklyn, New York.




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