Using your 401(k) to start or buy a business
There are three ways to use a 401(k) for a business. A 401(k) loan gives you up to $50,000 with no tax as long as you repay it on schedule, but only while you still work for the plan's sponsor. A ROBS puts your whole eligible balance into a C corporation through a rollover, with no tax when the money moves if the plan is run correctly. A withdrawal costs you income tax and, under 59½, the 10% additional tax. Buyers often pair a ROBS or savings with an SBA loan, which SBA's rules allow.
Which route fits you
Still employed, and need under $50,000
A 401(k) loan costs the least in fees and tax: none of either, and the interest goes back to your account. The risk is timing: the day you leave to run the business full time, the balance comes due. Run the “leaving your job” part of the calculator with the month you expect to quit.
Left the job, with a balance in an old plan or IRA
That’s the ROBS case. The whole eligible balance goes into the business without tax at the rollover, as long as the plan stays qualified, but you take on a C corporation, a retirement plan with annual filings, and the chance of losing the savings entirely. Run the ROBS calculator for fees and both outcomes.
Buying a business that already has cash flow
An SBA 7(a) loan is usually the first thing to price. Loans go up to $5 million, and a business with a track record can often borrow most of the price. Retirement money, through a ROBS or from savings you already have, becomes the down payment instead of the whole purchase price.
Withdrawing and paying the tax
It’s the simplest route and the most expensive. In the 24% bracket under 59½, $100,000 out of a 401(k) leaves about $66,000 before state tax. A ROBS avoids that cost, which is the main reason people put up with its complexity.
The numbers side by side
| $100,000 of retirement money, age 45, 24% federal bracket | Cash for the business | Cost to get it |
|---|---|---|
| 401(k) loan | $50,000 at most | Loan fee, if any; lost growth while it’s out |
| ROBS | About $100,000 | Provider fees: about $15,000 over 5 years at one provider’s published price |
| Withdrawal | About $66,000 | About $34,000 in federal tax and the 10%, before state tax |
The ROBS figure uses FranFund’s published price as of October 2026 ($4,995 to set up and $165 a month). Other providers publish different prices. Adjust it in the ROBS calculator.
What SBA lenders look at
Under SBA’s current rules (SOP 50 10 8.1, effective October 1, 2026), a lender looking at a start-up or acquisition wants:
- Equity. At least 10% of the project cost for a start-up. A ROBS is an accepted source; the lender has to note that it’s being used and collect the plan and corporate documents.
- Your guaranty. With a ROBS, the lender has to get your full personal guaranty as the plan’s sponsor, whatever your ownership share.
- Cash flow to repay it. Projections for a start-up, tax returns and financials for a purchase.
- Rate caps. SBA limits what lenders can charge. On a variable-rate loan over $350,000, the cap is the base rate plus 3 percentage points. Smaller loans can carry higher spreads.
Ask us about your plan
Tell us what you’re starting or buying, roughly what you have to put in, and what you’re trying to decide. A person reads it and replies by email. We don’t pass it to a ROBS provider or a lender.
Questions people ask
Can I use my 401(k) to buy a franchise?
Yes, through any of the three routes. A ROBS is common with franchise purchases because it can supply the equity an SBA lender asks for without creating a monthly payment.
Can I take a 401(k) loan to start a business while I'm still employed?
Yes, if your plan offers loans. The purpose doesn't matter under the tax rules. But if the business takes off and you quit to run it, the loan balance comes due, so plan for the payoff.
How much do I need to put down on an SBA loan for a start-up?
At least 10% of the project cost for a business that has been operating a year or less, under SBA SOP 50 10 8.1. Lenders can ask for more.