You could invest in the next big company before they go public

Private Placements is a term that refers to investing in privately-held entities, such as companies or small businesses.  Banks have recently tightened their purse strings when it comes to lending to these entities, creating a higher demand for development capital from investors.

For those seeking funds, obtaining capital from a self-directed IRA owner can be simpler and faster than the loan process with institutional lenders. For self-directed IRA owners, this type of lending has the potential to bring higher returns than the stock market or CDs.

Providing private loans to businesses is an allowable way to diversify your retirement portfolio. Your self-directed IRA can invest in:

Things to consider when investing in entities:

  • Make sure that you do your due diligence before lending money or investing in a business. See: NASAA Informed Investor Alert: Private Placement Offerings
  • Some entities do not allow investors to sell or withdraw funds for a fixed amount of time. If you are close to retirement, make sure that this will not interfere with your required minimum distributions.
  • Earnings from the entity might be taxable to the IRA, even if they are not paid out.
  • LLCs are considered securities in some states and may be required to meet the standards of securities offerings.
  • Creating an IRA LLC will give you "checkbook control" over your retirement funds. Learn more about this strategy here: What is Checkbook Control?

To learn more about the different ways your IRA can invest in private placements, or to make a private placement investment, please contact us today.

Disclaimer: Before you invest in this business sector using your IRA, it is best to consult with your investment, legal and tax advisor.  Entrust does not endorse or recommend any of these investments.  Proper due diligence by you the IRA holder is recommended before entering into any transaction.