Invest in California – Wine

Featured Image

California is home to some of America’s strongest institutions. Hollywood and up-and-coming technology companies have blossomed in recent decades, but vineyards and wine producers have existed on the west coast for centuries. It’s therefore no surprise that California is known worldwide for top-shelf wine production. Cabernet Sauvignon, Chardonnay, Merlot, and other varieties have been perfected in the hills of Napa Valley and Sonoma Valley.

California features several famous wine operations, but the door remains open for other, smaller vineyards or wineries. Anyone looking to start a company will likely need investors to catalyze their operations, and retirement accounts can be potent sources of start-up capital. Prospective investors may want to explore alternative investment options but may not have the money on hand to make a worthwhile investment. Those same individuals may have five or six-figure sums available in their self-directed IRAs and may not realize that those funds are just as eligible for investment. If you fall under this category and you’ve thought about financing a small vineyard, winery, or any other private company, self-directed retirement investing could be your answer.

Your retirement plan can’t own bottles of wine because they only carry collectible value in the eyes of the IRS. However, you may allocate your tax-advantaged retirement dollars toward the business of wine. If a new vineyard or winery owner needs funding, your retirement plan could issue a loan to help fund the business. Self-directed investors enjoy a higher degree of control over their retirement, all while yielding tax-advantaged income otherwise unavailable to investors who only allocate personal funds. Meanwhile, entrepreneurs can avoid the hassle of applying to banks and fund their fledgling enterprises with relative ease.

As long as a disqualified person doesn’t own more than 50% of the business or hold a key management position, you can approach your plan-held loan in a similar manner as that of a non-retirement transaction. As the plan holder, you’re able to make final decisions on the terms of the loan. Your borrower may request the necessary principal amount, though your due diligence and comfort level will ultimately dictate your course of action. You may also specify the interest rate and payment frequency as long as both conditions reflect a genuine business transaction. The interest rate may not be 0% and you must require at least one payment per year.

Furthermore, you may elect to secure the loan with collateral. Private lenders can mitigate risks and borrowers can reduce their interest payments by leveraging real estate, trust funds, or other personal assets as repayment measures if a loan can’t be fulfilled. A secured promissory note protects investors by reducing the likelihood of a total loss. On the other hand, if you know and trust your borrower, you can reduce your workload by foregoing collateral and establishing an unsecured promissory note.

In either case, an original copy of your loan (and any applicable security documentation) will be safely stored in the New Direction Trust Company vault until we receive additional direction from you. To learn more about investing in private businesses via promissory notes, please feel free to send us an e-mail at or give us a call at 877-742-1270.