"Rollover for Business Startups" (ROBS) Loan Financing (Searchers/Bankers)

by a searcher from University of Virginia-Darden - Darden School of Business

1 year ago

I have been researching how to use my 401k balance to finance a chunk of a new acquisition.  Any searchers have experience doing this?  Or searchers that explored this option and decided against it for various reasons?  I am also curious to get lender perspectives (pros/cons).  I assume a ROBS loan can sit in between a senior loan and a seller note but not exactly sure.  Thank you in advance for your thoughts.

0 likes
87 views
15 comments

investor from University of Illinois at Urbana-Champaign

We recently closed a deal using ROBs. Recommend 2 things###-###-#### lawyer that understands it and###-###-#### k) plan admin that understands it. If you mess it up, the consequences can be super expensive and it could blow up your deal and your investment. The core tenets from a buyer side are must be a c-corp and the investor must be W-2 of employee of the company. You can also do a Roth conversion post close. But there are potholes if you don't do it right. The attorney we used was Dorothy "Doll" Lank. Her email is --@----.com If you are serious, I would start there. She's great. We structured as equity - shares in the company. Good luck, reach out if you'd like more color.

1 year ago | like reply | 0 likes

searcher from University of Illinois at Urbana-Champaign

ROBS 401k finds CANNOT be used for a "loan." It's equity, and is thus junior to senior and seller debt.

1 year ago | like reply | 0 likes

More on Searchfunder

Just Closed on My First Deal! Reflections and Takeaways for other Searchers

45,152 transactions are available on Searchfunder (now searchable by keyword)

Now everyone has unlimited IBISWorld access

Family office looking for traditional searchers

Examples of self-funded searcher websites

2 Best Ways To Find Motivated Sellers, Off-Market Deals

What are market terms for Seller Notes?

6-7x for a Self-funded Search Deal?

Searchfunder is an online community and toolkit for searchfunds. Over 80% of those involved in searchfunds maintain a Searchfunder.com account to help them network, problem solve challenges, and keep up with the industry.

We maintain partnerships with database providers that make searching more effective, efficient and affordable along with features that help searchers find deals and investors and vice versa.