Use Your IRA For SBA Loan Equity To Start Or Expand Your Business And Increase Your Working Capital
You can use your IRA as equity when applying for an SBA loan. The concept is one of the best-kept secrets in the industry and easy to accomplish assuming you follow the correct procedure. SBA-Capital will provide you with information on this blog that will allow you to access this invaluable resource, use it to make investments, start your own business, and raise working capital to operate your business. 
More financing information on our website www.sba-capital.com.
You will need to engage a Trust company, such as Millennium Trust or Equity Trust, that specializes in being a Custodian Trust for Self-Directed IRA accounts. Your money always remains in your possession which you control 100% with the Trust serving as your Custodian Manager. The trust is also responsible for filing your annual tax return with the IRS as part of their service agreement.
Hypothetical loan example – John and Mary Doe plan to build a ground up car wash that cost $4 M including land. The SBA 7a lender requires 20% down, and the Doe’s only have $300,000 in available cash leaving them $500,000 short.
For this example, we will assume each spouse has $600,000 in their IRA account. Either spouse could create a $500,000 custodian trust and transfer $500,000 from their current IRA to their new Custodian Trust which will be a transfer of IRA funds and not a distribution, so there will be no tax implications. John and Mary Doe could each create a custodian trust and contribute $250,000. For this example, each spouse will contribute 250,000 from their custodian Trust, and Mr. and Mrs. Doe (husband and wife) contribute $300,000.
John and Mary will create the “Clean Wash LLP” that will own the car wash. The LLP will borrow $3.2M to construct and own the wash. The $800,000 equity is invested in the partnership as shown below.
| Ownership | Dollars Contributed | % Ownership |
| John & Mary Doe (man & wife) | $300,000.00 | 37.50% |
| Mary Doe IRA Trust account: | $250,000.00 | 31.25% |
| John Doe IRA Trust account: | $250,000.00 | 31.25% |
Profits or sales proceeds paid are calculated on each partner’s percentage of ownership. Funds paid to the IRA Trust accounts respectfully will be tax deferred just as it would be if it had remained in the IRA account.
Hershel Pierce, CEO of SBA-Capital, has created and used the above investment vehicle over the past 20 years with good results. Contact him today for a free consultation on how you can monetize the value of your IRA without losing the tax deferral. Other methods to monetize assets to reduce your equity requirements to be covered in a future blog.
