Financing is still tough for many small businesses and Wall Street is too busy
paying themselves bonuses rather than expanding their business lending. Customers
are taking longer to pay and your bills may be piling up. How can you meet your
cash needs?
After you have exhausted your traditional options of financing from banks
and credit cards you may want to consider a risky, but very good if done correctly,
way of paying your bills in the downturn: Use Your 401K.
Borrowing from your 401K can be helpful in two situations:
1. If you have a self-directed 401K, you can do a rollover as business
startup to invest in or buy a new business. In esscense, instead of
investing in a mutual fund that invests in someone elses business, you are
investing
in your own business. However, the risk here is that if your business fails
you will lose the money you took out but most likely do not have to pay it
back.
2. If you need cash temporarily such as to pay employees while your are awaiting
a major payment from a customer, you can actually borrow from your IRA without
any penalities as long as you put the money back within 60 days. This can be
very convenient if you are sure that your customer will pay you or you know
that you will be able to repay the money. Otherwise, you will incur the 10%
penalty and must payback what you borrowed.
Even if you do not want to borrow from your 401K, you should at least make
sure that your plans has these options in case you ever need them.
To easily compare and get free price quotes for 401k plans please fill out
the form above or click here.
The entire article from CNN can be found here.
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