So rollover as business start-up is a very interesting strategy. This allows you to take your retirement money, 401K, IRA, and put it completely within your control in order to specifically invest it into your own business.
Now, let’s say you want to start a business. You try to go into a bank and get a loan. Not going to happen. They don’t want to lend to start-ups. Banking dried up in 2008. And that’s when people really started using this strategy, because well, they couldn’t go out and start the business that they wanted to. In addition to that, a lot of people got laid off in 2008, because they’re senior level executives. They got big salaries that they need to take home to their families, but they’re tired of working for the corporate man. They want to go out. And they want to start their own business.
But with the lending dried up, they were looking at alternative ways to get this done. And the ROBS transaction, Rollover as Business Start-Ups became very popular in 2008. Now, while it’s been around since the year 2000, from 2008 till now, it’s really gained a lot of popularity in the franchising community. Why? There is a specific market of people who have an investment they need to make for $250,000 or less. And if you have an investment for $250,000 or less, is a bank going to look at you? No chance. They don’t want to, because it’s too small that they do the same amount paperwork for $1,000,000 loan versus a $200,000.
So those people were coming in with their retirement money, investing into their business with no penalties or taxable event and actually having some pretty decent success. Why? Because any profits made from the investment of this business do not go back to a bank. There’s no banks involved. This is not a loan. There’s no interest. You’re the investor and owner of your own business, and you can do whatever you want with this transaction as long as it’s legitimate business concerns. And that’s a really cool thing you can do to get your business off the ground and not have anyone tell you otherwise.