Invest In You, Invest in Your Business…


By Toni Jakovec

I had the opportunity to sit down and talk to Dave Woggon, President and Owner of Phoenix Funding Source who has helped many vomFASS franchisees secure funding for their business.  

Dave has 26 years of franchise experience, the last four, helping people secure their franchise funding. He has helped a large percentage of the most recent vomFASS franchises.  The numerous locations he has facilitated include: Scottsdale, AZ; Naples, FL; Noblesville, IN; Bloomington (Mall of America), MN; Maple Grove, MN; Cary, NC; Wilmington, NC; and Houston, TX.

“The number one hurdle that a new business owner has is the FEAR of funding,” says Woggon.  “Nobody wakes up one morning and says, ‘my dream is to get a loan’ (laughs).  Their dream is to own their own business and to be their own boss. They want to have flexibility, independence, control of their future and the ability to create financial independence.  My job is to help make their dream a reality, because if they’re not comfortable with their funding options, they find excuses not to move forward.  I always tell people that the difference between a business owner and a “wannabe” business owner is the business owner learns how to control his FEARS, and the “wannabe” business owner is controlled by FEAR, thus always remaining a ‘wannabe.’”

In my conversation with Dave, we talked about one of the most popular forms of funding which is utilizing retirement funds without tax or penalty from the IRS to invest in a vomFASS franchise.

Toni Jakovec:  Is it possible to use retirement funds to invest and fund a new business without TAX or PENALTY?

Dave Woggon:  Yes, you can use a 401(k) from a previous employer or a Traditional IRA (Not a ROTH IRA), 403b, 457, SEP IRA, Pension Plans, Thrift Savings Plan (TSP-Military), Annuities, & KEOGHS.

TJ:  Do you borrow from your retirement?

DW:  No, it is not a loan, you are not borrowing against your retirement and you are not required to pay it back.  It’s DEBT-FREE funding.

TJ:  How does it work?

DW:  Today, one’s retirement is probably invested by a brokerage firm, buying stock in publicly held companies.  Rather than investing in publicly held companies, you would be investing and buying stock in a privately held company…your company.

Four Step Process:

1.  Form a C-Corporation.

2.  Set up new company sponsored 401K.

3.  Rollover funds from current retirement to new Company 401K.

4.  401K Plan buys company stock and transfers money into business checking account.

TJ:  Are most CPAs/Attorneys familiar with this? Is it legal? How long have people been doing this?

DW:  The governing body of law that allows a 401k Plan to purchase stock in the plan sponsor was passed in 1974. Although retirement plans like this are prevalent within big corporations, the use in small corporations is relatively new. For that reason, your CPA or Attorney may not be aware of it.

TJ:  Why a C-Corporation?

DW:  A retirement plan is allowed to purchase stock of the plan sponsor, so long as the plan sponsor is a “separate taxpaying entity.” The only corporate entity that is considered a “separate taxpaying entity” is a C-Corporation.

TJ:  Can the new owner take a paycheck?

DW:  Yes, they can pay themselves a salary as soon as they capitalize their business (typically 4 to 5 weeks). Phoenix Funding Source suggest that they consult with their tax advisor regarding salary and payroll.

TJ:  Do they need to use or invest all of their retirement?

DW:  No, they can do a partial or full rollover, the choice is theirs.  Whatever money they do not invest in their business would remain in the new company’s 401K and those funds will be invested by them and the brokerage company representative at Wells Fargo Advisors (recommended source) in non-company investments.  We recommend that they use a minimum of $35K to make this program financially efficient for them.

TJ:  Can the new owners contribute to their 401K?

DW:  Yes, as an employee and owner of their company, the IRS allows for them to contribute and defer up to $51K a year (based on personal contributions, company match, & profit sharing contributions) if they are under the age of 50 years old.  If they are 50 and older, they can contribute and defer up to $56,500 per year thanks to the IRS catchup program.

TJ:  Can the new owners fund their business using retirement funds and an SBA loan?

DW:  Yes, combination funding, using retirement funds and an SBA loan, is the most popular form of funding option.  When the retirement funds buy stock in their company and are transferred to the business checking account, the SBA lender sees the cash in business checking account as “liquid cash,” thus meeting the cash liquid requirement (30% for start-up) that many SBA lenders have in getting a loan.

Dave Woggon has helped many vomFASS franchisees secure lending for their new business.  To learn more about how you can fund your business, contact Dave directly at Phoenix Funding Source:

David J. Woggon, President
Senior Funding Advisor
Direct:   608.526.1169
Mobile: 608.797.3227
FAX:      817.887.4921

Disclaimer: This information is not intended as an offer to sell, or the solicitation of an offer to buy, a franchise. It is for information purposes only. Currently, the following states in the United States regulate the offer and sale of franchises: California, Hawaii, Illinois, Indiana, Maryland, Michigan, Minnesota, New York, North Dakota, Oregon, Rhode Island, South Dakota, Virginia, Washington, and Wisconsin. If you are a resident of one of these states, we will not offer you a franchise unless and until we have complied with applicable pre-sale registration and disclosure requirements in your jurisdiction.