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By Molly Klein • November 2, 2015

Using a Rainmaker Rollover Plan as Part of the Funding Strategy

One funding strategy for business acquisitions that many brokers (or their candidates) may not be aware of is the Rainmaker Plan®, an innovative funding method that allows business owners to purchase a business utilizing their retirement funds. Here are some of the top benefits of utilizing this funding strategy:

  • 1. Your client can use their retirement savings tax-deferred and penalty-free to provide the needed equity injection for an SBA loan.
    • Many entrepreneurs have the majority of their saving in their IRA, 401(k) or other retirement plans - not in their savings or checking accounts. When it comes time to purchase a business, they will often need to look to their retirement savings to provide the necessary funds for the cash injection for an SBA loan. If they withdraw the money without using the Rainmaker structure, they will be assessed taxes and penalties that will often make the transaction too costly to proceed. Using Benetrends' Rainmaker Plan, your client will have full access to their retirement savings, tax-deferred and penalty-free.
    2. Your clients can pay themselves a salary from the Rainmaker Plan.
    • The Rainmaker Plan allows your clients to pay themselves a salary from the rollover proceeds, thereby eliminating one of the biggest fears they have when purchasing a business: "How am I going to pay my bills while I get the business turned around?" Eliminating this fear can help you close more deals.
    3. Utilizing the Rainmaker Plan can make financing a business with weak cash flow much easier.
    • By providing a means to increase the capital injection for a loan, as well as the post-closing liquidity, the Benetrends Rainmaker Plan can significantly increase the number of clients who can qualify for a loan.
    4. The Benetrends Rainmaker Plan can make a difficult-to-fund business fundable.
    • If you are listing a business that doesn't have enough cash flow to cover both the business debt and personal debt, the bank will recognize the clients ability to pay themselves a salary from the Rainmaker Plan to cover the personal debt such as mortgages, car payments, etc. Now, when they look at the cash flow of the business, it only has to cover the business debt.

    Contact your Benetrends representative to learn more.