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  • Should You Start a Business in Retirement?

    Game Plan

    In-Depth

    Financing Your Encore Startup

    The decision to become a business owner and the type of business model you choose will depend in part on how much money you’ve got to get the venture off the ground. Financing options for startups are similar whether you’re age 30 or 55, with one exception: as a retiree, you may have a substantial balance in retirement accounts.

    Here are a few money-related issues to keep in mind:

    • Your startup doesn’t have to cost a lot. The SBA reports that many home-based businesses can be started for about $1,000. You can put that on your credit card. Even some home-based franchises can be launched for around $2,000.
    • Consider SBA-backed small business loans. The Small Business Administration has loaned more than $30 billion to small business owners. Loans are available for starting and expanding a business, and for supporting green industries. SBA's Loans and Grants Search Tool lets you quickly find financing options. You can also contact your local SBA office.
    • Relying on family and friends. According to the 2012 Global Entrepreneurship Monitor Report, entrepreneurship finance at any age still depends heavily on bootstrapping along with investment from close circles.
    • Tapping your retirement accounts. Many financial professionals advise against borrowing or withdrawing from tax-deferred retirement accounts for business ventures. If your venture fails, it could leave you in a perilous financial position. But borrowing your own money may give you more flexibility and control than borrowing from outside sources. Also, most 401(k) plans offer attractive loan interest rates that are probably lower than commercial loans. If you’re highly confident in your chances for success, you may be able to grow some of your retirement savings by investing in yourself.