Bad Credit Small Business Loans

Small business owners with bad credit face many challenges when trying to get a loan through banks and lending institutions.  Frequent loan rejections and high interest rates are common. Potentially there is a simple solution.

Do you have assets in a 401k, 403b or 457 plan with an ex-employer or do you have an IRA, SEP IRA, Simple IRA or Keogh?

If you do then there may be a simple solution to getting a loan.  Provided you are self employed you may be able to setup your own Individual 401k, transfer the retirement accounts into the Individual 401k and then you use the 401k money as collateral to get a loan. You can get a loan up to ½ of the value of the Individual 401k up to a maximum of $50,000. 

Because you are using your Individual 401k's balance as collateral, you are automatically approved for the loan.  Loan interest rates can be as low as the Prime rate (3.25% as of March 2010) and because you are borrowing your money, the interest and principal is repaid by you back into your Individual 401k (not to a bank). Loans are typically repaid over 5 years.

Small business loans are fast, easy to obtain and have favorable interest rates when utilizing the loan provision available in an Individual 401k.

What are the advantages of using an Individual 401k loan as a small business loan?

1. The loan can be used for any purpose.
2. There are no income or credit qualifications to receive the loan.
3. The monthly loan payments of principal and interest are repaid back into your own Individual 401k.

What is the process to secure a small business loan using the Individual 401k?

1. Setup an Individual 401k - You are permitted to setup an Individual 401k provided you are self employed and have no full time W-2 employees other than a spouse. You are eligible to establish an Individual 401k for a side business even if you participate in a 401k, 403b or 457 plan through your primary employer. Sole proprietorships, S and C corporations, partnerships and LLCs qualify.
   
   
2. Rollovers and Transfers - You can rollover your 401k, 403b, 457 retirement plan from a previous employer. You can transfer a Rollover IRA, Traditional IRA, SEP IRA, Keogh etc. into your Individual 401k. By consolidating your existing retirement accounts into an Individual 401k you build the 401k's balance quickly and then can use its value as collateral to receive a larger self employed loan.
   
   
3. Submit Loan Request Form - Once the retirement assets have been transferred into your Individual 401k for 10 business days, you are immediately eligible for a loan. You are permitted to receive a loan up to ½ of the total 401k value up to a maximum of $50,000.

Learn more about how to obtain small business loans using an Individual 401k loan.

   Need Help or Advice?  |  Open an Individual 401k

Disclosures:

*  The information on this page is for informational purposes only and does not constitute, and should not be construed as, professional, legal or tax advice. To determine your individual tax situation and specific needs, please consult a professional tax advisor.

* Information contained in these sections merely highlight some benefits. There are risks involved with all investments that could include tax penalties and risk/loss of principal.