So you’re a business owner, and you have a whole life insurance policy, and you want to leverage the life insurance cash value to make an investment in your business. But what happens when you want to infuse some of that wealth into a business expansion, into operations, or into a business opportunity?
Let’s assume that I own an insurance policy, and I want to take a loan for my business. The first step will be for me to request a loan from the insurance company. The insurance company will send me a check or direct deposit into my bank account, and then I could make a separate loan to my business.
With that, we’ll have a promissory note drafted up between the business and myself laying out the terms of the agreement. It’ll include the payment amount, the interest rates, and the amortization of the loan. Additionally, there’ll be an amortization schedule that’ll lay out the principal and interest payments of this loan between me and my business.
You see, it’s important to make sure that you’re following the amortization schedule because the business is going to want to deduct the interest that it pays to the loan provider (myself), for the loan that I made to my business. So the business wants to get that deduction.
But now, I have to claim that same amount of interest as interest income, and now I have to file that on my tax return as interest income. Any accountant can help with that because they’ll have the amortization schedule and hypothetically, they’ll be handling both my business and my personal tax returns.
So continuing with the logistics, every month, my business will pay me the set amount from our promissory note, and I will repay my policy loan.
You see a very key step is making sure that I make the payment back to my policy. Why? Well, number one, I wants to reduce the amount of interest I pay to the insurance company. But number two, I wants to make sure that I have money in the policy for the next opportunity, or the next emergency, or the next expansion of my business.
You see, there’s a second layer here. With the life insurance policy I’m paying premiums, and after I took the loan, I’m also infusing cash back into the policy via these loan repayments. So it’s like I have two hoses filling up the same bucket. Because I’m filling up this bucket from two hoses, the premium and the loan repayment, it’s going to get more and more efficient each and every single year. I’ll have access to more and more cash with each passing year, and that will help to take advantage of bigger opportunities down the road.
You see, the goal is to control the entire financing function in my life so I could control the financing for myself, things that I want as well as for my business. And when we talk about making sure that you’re in control or regaining control of your cash, we’re talking about your cash. We’re talking about your cash flow. And we’re talking about your future.
If you understand this concept, it’ll be easy for you to create, cultivate and keep your wealth.
And remember, it’s not how much money you make, it’s how much money you keep that really matters.
