Forgo the Fund?
You're risking your retirement, but if you believe in your startup you can fund it with your 401(k).
That money in your 401(k) retirement account can look very appealing when you're trying to finance your new startup. There's a balance in there, it's already your money, and you feel like it's the quickest way to get your business off the ground.
Using her 401(k) account was a successful move for Abbey Branch, founder and creator of the Abbey Branch line of trendy handbags that meld fashion, art and architecture. While working as a sales rep for a wall-covering manufacturer, she decided to start her own company. To launch her brand, she felt she needed a substantial amount of startup capital. She already had a prototype and a few interested investors, says Branch, 32, "but I had this gut feeling that with that would come unrealistic expectations." After some soul-searching, she decided she could make back any money she took from her $55,000 401(k), so she used the entire amount and paid $10,000 in penalties. The cash infusion helped her start manufacturing and build her website in 2003 from her Spring, Texas, locale.
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