Using Solo 401k Loan Feature

The Solo 401k plan provides flexible investment opportunities for qualified holders. This enables the person’s retirement funds to be invested in different venture types.  The investment could be made without the need for a custodian’s consent. There are very minimal types of investment ventures which are prohibited under the Solo 401k rules.

Allowable investment types for Solo 401k plan

 The following are allowable investments using a Solo 401k plan:

• Tax liens
• Private businesses and private placements
• Private loans and businesses such as Limited Liability Companies or LLC and Limited Liability Partnerships
• Residential, commercial and domestic or foreign real estate. This also includes raw land, foreclosure property and others that offer mortgages or mortgage pools
• Industries that include stocks, mutual funds and bonds, foreign currencies, certain coins and precious metals

It is important to note that only businesses without full-time employees are eligible for the Solo 401k plan. The exception is if the hired full-time employee is the owner’s spouse. Any other employees aged 21 years and up are not admissible or covered by the plan. Moreover, the eligible company or sole proprietor is expected to provide their solo 401k contributions for the plan.

Benefits of Solo 401k loan feature

Account holders can use the Solo 401k loan feature and access up to $50,000 of account value, which can be used to fund their own business. The borrowed amount could also finance other needs such as:

• Pay for college costs and expenses, unexpected emergencies and consolidate debts
• Lend the funds to any third-party in order to pay a much higher interest rate thus enjoying bigger profits and revenue
• Invest on lucrative industries such as real estate projects which could potentially generate a much higher interest rate return compared to paying a low interest rate
• Invest on a business or new franchise venture
• Invest on alternative transactions or businesses that could guarantee higher return rates compared to low interest rates such as those imposed on private placements, tax liens and mortgage pools
• Avoid penalties and gain that could amount up to $50,000 without any restrictions

The Solo 401k loan feature offers a good alternative for qualified businesses owners. Sole proprietors who are eligible for the plan can use this opportunity to finance their business or use the funds for more lucrative business ventures and to boost their revenues.