The SBA and BORSA Work Together to Find You an Equity Injection Solution

As the SBA (Small Business Administration) offers financial assistance to entrepreneurs through their 7(a) loan program, finding the funds required to launch your small business may seem like a cut and dry process. Unfortunately, that is not always the case. The SBA requires an equity injection with every loan that they back as they consider adequate equity important to the long-term success of a business.

An equity injection is simply a cash investment that an SBA loan applicant is required to provide as a stipulation of receiving the loan. The borrower must provide an equity injection or cash investment into their business for two reasons. First, such an investment shows lenders that the borrower is both personally and financially committed to the success of the business and is willing to take a risk. Second, the money from an equity injection minimizes the amount that must be financed which makes the lender and the SBA more willing to give out a loan.

Coming up with the necessary money for the injection may be difficult. Before the inception of the SOP 50-10, the equity money required could come from a home equity loan or another form of personal credit. Not anymore. However, the DRDA P.C. firm, which specializes in small business consulting, has devised a way to use the funds from a retirement account as an equity injection. By taking advantage of a program called a BORSA (Business Owner’s Retirement Savings Account) plan, prospective small business owners can gain access to the funds stored in a retirement account to use as capital or equity money for a start-up. Qualified plans include 401(a) pension, profit sharing 401(k), 403(b), 475, or IRA rollovers. Normally, withdrawing from such a fund before the age of 65 is a bad idea because of all the penalties associated with early withdrawal. A BORSA plan is a viable alternative because no taxes or distributions are incurred from taking your money out when needed.

With over 23 years of experience with SBA lending, DRDA advisors can help prospective small business owners understand the intricacies of the loan application process. The equity injection may just be a bump in the road to making all your business dreams come true. Owning your own business requires a lot of know-how, so be sure to take advantage of the business advisory services provided by DRDA P.C.

Choosing an SBA loan to start your small business may be a smart move. Just make sure you have all your ducks in a row before starting the application process. The certified public accountants and business consultants at DRDA P.C. can help you understand how an SBA loan works and what you need to get one. Used in conjunction with a BORSA plan, a loan from the SBA should get you up and running. For more information on how a BORSA plan can be your equity injection solution, contact the experts at DRDA P.C. today at 281-954-6040 or visit www.drdacpa.com.