Your Questions About Small Business Financing Options

Betty asks…

Small Business financing options?

Can anyone shed light on the best option between Audeo (Guidant) or Pension Transfer Trust that use 401k funds to form a corporation and avoid a taxable event?

admin answers:

I don’t know which is better…sorry. I do know that you can’t use qualified plan assets to purchase stock in a new business as the stock has a FMV of zero…thus making it a prohibited transaction. However, you can ISSUE shares to the plan and thus conduct transactions inside the plan. That was derived from swanson v. Commissioner.

Also have to be careful if companies involved have common ownership…prohibited!

And, have to watch if more than 25% of shares of an LLC are owned by the plan. If that’s the case then I believe that 100% of LLC’s assets are considered plan assets. Which again may constitute a prohibited transaction but at the very least makes the LLC fiduciareis of the plan.

IMHO this is very very very aggressive use of the code and rules. And typically that comes back to haunt those that are involved. And, if not all of the 401k participants are involved in the new corporation then you have serious personal liablity if the new corporation fails. Prudent man would not invest retirement assets in new venture…

Don’t know if that applies to what you’re trying to do or not.

Paul asks…

What are the various financing option for small business?

I want to start a small business. Just want to know what are the various Financing Options for a Small Business

admin answers:

Things to consider when identifying the purpose of business finance:
Do I need additional funds to increase the production or service capacity of my business.
E.g. By purchase capital items such as equipment, buildings, machinery or motor vehicles.
Do I need additional funds to fulfil an increased demand for my products and/or services.
E.g. By increasing trading stock, supplies or staff?
Do I need additional funds to expand distribution or develop new markets.
E.g. By developing an e-commerce website or hiring new business development and sales staff.
Do I need additional funds for research and development.
E.g. To market research, develop and test a new product line.

What to do:
Identify the purpose of funds
What will you use the business finance for? Identify the purpose of the funds sought might involve conducting some preliminary market research to determine, for example, wether there is demand for increased supply or production of your goods or services.
Identify a finance amount
Make a realistic estimate of how much business finance you require.
Identify business objectives
Set clear growth and profit objectives for the new ventures that will be funded by the additional finance you’re seeking. Update your business plan accordingly. Http://

Sandra asks…

Where can I find alternate small business loan options?

I am looking for a small business startup loan that doesn’t go through the SBA or a small business acquisition loan that also has no sba backing. We have limited liquid capital, four partners, three above average credit scores, and all are working outside the stasrt-up opp, two full-time. Are there alternative financing options?

admin answers:

Depending on how much you’re looking for, and how far along you are with your venture there are number of options that may be available to you.

For starters, bootstrapping is the most common method for nascent entrepreneurs, i.e., raising money from your job, or friends and family. Of course, that depends on your financial situation, and your comfort having friends and family as debtors or investors (depending on how you structure the arrangement).

There are many peer to peer lending sites available like Prosper ( ) or the Lending Club ( ).

You could also try a site like ibovo ( ), which focuses on helping startups find business partners/investors that are interested in that specific industry/style of business.

If you’re further along with your venture and/or interested you could also try a bank loan from your local community bank or one of the larger banks.

Lastly, there’s always angel investors and venture capital. Angel investors might be the better option if you’re looking to continue to run the startup yourself, and don’t want to part a good deal of equity.

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