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.
Do you realize we finance every single purchase we make? We either go to a bank or finance company and pay up interest, or we pay cash and we give up interest. But if you’re paying cash, I’m sure your intention isn’t to give up control of your money, or isn’t to lose opportunity cost.
Today, we’re going to talk about how you could still pay cash for things without giving up opportunity costs and without giving up control of your dollar.
You may be familiar with the two main ways of financing any purchase. The debtor, who digs a hole and fills it up and just fights to get their head above the horizon, that zero line. Or the saver, who is kind of the debtor in reverse. They save up money as a matter of course, but once they have enough to make their major capital purchase, they drain the tank and they give up the opportunity cost of the money that could have been earned on their assets.
In both situations, the debtor and the saver spend a lot of their time at the zero line. They don’t get to experience any of the benefits of compound interest. You see, when you’re in debt, your cash flow is obligated to filling in that hole, to getting back up to that zero line. But when you pay cash, you’re still married to that zero line, you’re still saving as a matter of course, but you’re not really getting ahead because once that purchases made, you’ve traded your cash, that you owned and controlled, for the asset for the purchase, whether it’s a vacation, whether it’s a home remodel, it doesn’t matter. All of that cash is gone because you made a purchase.
But that can’t be what the wealthy are doing, right?
What wealthy people do is really simple. They create, cultivate, and keep their money. They keep in control of their wealth as long as possible. Now we have this question, if I want to make a purchase, we don’t want to finance and we don’t want to pay cash, how can I make the purchase?
With this product, we’re able to leverage against our cash value that has accumulated within the policy, without giving up the compound interest. In essence, we’re able to take back the finance function within our own lives.
The key thing here is that we still get to make the purchase. We can make purchases for our own life, whether it’s sending our kids to college or paying for their tuition or paying for a wedding or a down payment on the house. The options are literally limitless.
What this extra step adds is a way to finance these purchases using your own money, without giving up control of the money, without being penalized by taxes, and without being dependent on banks and credit companies.
Not to mention without having to drain down the tank and giving up opportunity costs on our money or without having to give up control of the process. We give our clients a choice. You can either be controlled by the process or be in control of the process. Which would you rather?
I would argue that most financial frustrations come from not having access to money when we really need something. When you have access to cash, it seems like opportunities naturally find you. So whether it’s a business endeavor or an investment opportunity, the options are limitless as to why you should use this cash for. And when you’re able to take advantage of an external opportunity, you’re able to earn an external rate of return on your money, as well as the internal rate of return on your money.
So how does this play out? Well, you start a policy, you build up a pool of cash that you’re able to access and repay because you own and control that policy. And it’s a matter of course, you’re a saver. You’re always saving money. You’re always being an honest banker and paying yourself back. Then you’re able to leverage that money for retirement on a taxpayer basis and the leftovers get passed on to your family on a tax favored basis.
Number one, the cash value grows on a tax deferred basis.
Number two, you’re able to access the cash value on a tax free basis through the loan provision.
Number three, when you die, the life insurance death benefits pass outside of federal income taxes to your name beneficiary. And also, in most states, the death benefit is outside of state income tax and usually state inheritance tax.
So let’s summarize. Number one, you get to make the purchase. Number two, your money earns uninterrupted compounding of interest. Number three, you’re in control of the process. Number four, numerous tax benefits.
Cash flow is the lifeblood of any business, and having access to cash is kind of like the lungs. If you’re a business owner, you know this and you know it all too well. When you don’t have access to cash or cash flow, it feels like you’re suffocating.
So the question is, as a business owner, how do you position yourself so you have the lifeblood and the lungs of your business working together all the time.
Recently, Intuit did a survey of business owners all over the world, and they found that 61% of all businesses struggle with cash flow and 69% of business owners admitted to losing sleep or sleeping less due to cash concerns.
Some businesses are seasonal and their cash flow operates on a cyclical basis. Some quarters they have cash. Other quarters they’re a little light on cash.
On the other hand, some companies have chronic cash flow issues. It seems like they’re always playing catch up or they never have enough cash to take care of either running their business or growing their business. Either way, it could feel like you’re always putting out cash flow fires. It could feel like your business is suffocating and that could be very stressful. It all comes from cash flow not being as efficient as possible.
Over the past 37 years, I’ve worked with small business owners. I’ve worked with families. One thing I’ve determined is that their cash flow issues don’t have to be. It all stems from an inefficient way of utilizing their cash and their cash flow.
You see, it’s not how much money you make, it’s how much money you keep that really matters. What are you doing to maintain wealth within your business so that you’re off the debt cycle and you’re not dependent on external things in order to have smooth cash flow?
Number one, we want tax advantages. We are business owners after all.
Number two, we want guaranteed access. We want to be in control of the cash and the cash flow going in and out of this warehouse.
Number three, we want a reasonable rate of return. We don’t need to hit a home run, but we want to make sure that our money is working for us 24/7.
You see, we believe there’s more opportunity in avoiding the losses, than picking the winners. Meaning that if you could make your cash flow more efficient and make this warehouse for your wealth as efficient as possible, you don’t need to hit it out of the park with investments. You’re able to maintain your wealth, keep it safe, keep it within your business, keep it within your family, and still accomplish your goals with guaranteed access to that money.
But what does that guaranteed access actually mean for you?
Well, it means that you could take back the financing function of your business. Imagine not having to be dependent on banks and creditors in order to make major purchases within your business.
Now imagine being able to restructure your current debts to build this warehouse of wealth, to finally be in control of your cash flow so you don’t have these chronic or cyclical cash flow dry spells.
But you see, the first step is creating that warehouse of wealth, because if you don’t have the warehouse, you don’t have a pool of money that you could access. Everything else is out the window. You no longer have control. You no longer have uninterrupted compounding of interest.
So let’s talk about the warehouse. What we talk about on our channel is a specially designed whole life insurance policy designed for cash accumulation, where you are able to store and warehouse your wealth, build up that cash over time, and leverage it in the future without interrupting the compounding of interest on your money.
You see, the money never actually leaves the life insurance policy. A lien is placed against the cash value and a separate loan is taken out from the insurance company. It’s a loan, so naturally there’s no tax to access that money through the loan. And you, as the business owner, get to decide the repayment terms.
What this translates to is a tool that you’re able to use as a business owner to function within your business to relieve the cash flow stress that 61% of you are facing, and ultimately build a warehouse of wealth for your business and your family.
In life, everything has a cost. There are the things that we see, but there are also the things that we don’t see. And unfortunately, the cost of the things we don’t see could be significantly greater than the cost of the things that we see.
When it comes to business succession planning, a lot of business owners tend to put it off. They don’t want to pay the cost of getting the planning put in place and funding the plan. But what they don’t see is the cost of that inaction.
When it comes to family businesses, there are a lot of dynamics involved. You have spouses, you have children that are involved in the business, you have children that aren’t involved in the business, and it could get a little sticky. So how do you smoothly transition and allow the next generation to step in, gain control of the business while you’re still there and ultimately at your death?
One thing we know for sure. Fair is not equal, and equal is not fair. What do we mean by that?
Let’s assume you have two children, one working in the business and one who is not working in the business. If you leave the business 50/50 to each of your children, that’s not fair to the child who’s working in the business. And ultimately, it’s not going to be fair to the child who’s not working in the business.
The child who’s working in the business wants to grow the business. The child who’s not working in the business wants to take income from the business. Those conflicting goals can cause a lot of strain on the relationship of your children, and it could also put a lot of stress on the business.
If I’m the child who’s working in the business and my sibling is getting half of the profits, what motivation do I have to build the business If I’m only getting half of what I deserve, what I’m earning, and what I’m working towards every single day?
Conversely, the child who’s not working in the business wants to take as much income out of the business as possible, stripping the business of its profits and its ability to reinvest and grow the business.
So how do we solve this issue? How do we make sure that the child who’s not in the business gets properly compensated from her parent’s estate and make sure that the child that’s in the business is able to grow and expand and really profit from what their parent has established for them.
And the answer is with properly documented and properly funded businesses succession planning. You see, business succession planning lays out exactly what you want to have happen at your death, disability or retirement to take care of the child that’s in the business as well as should properly fund the buyout of your other child who’s not involved in the business.
But the problem becomes how do you come up with the funding, the liquid cash to buy out the nonparticipating child? That’s where proper planning comes into play. And there are many ways that you could fund or reward the child who is not participating in the business.
Number one, you could pay cash. Keep it liquid. Take it out of the business. Buy out that child. Number two, you could finance. You could go to the bank finance a loan, and pay it back over time if you don’t have the cash. And the third way is to buy life insurance, insuring that first generation owner so that at their death, liquid cash comes out of the life insurance policy and allows us to buy out that other sibling.
By insuring the first generation owner. Nothing happens until that person dies. And the event that creates the problem, the distribution of the business or the value of the business is also the event that triggers the solution, life Insurance.
Are you in business with your parents or parent and you’re wondering how you could buy them out when the time comes. That’s a huge issue for the younger generations, like millennials, as their parents approach the retirement age.
In America, it’s not uncommon to be in business with your family members, but what happens when the older generation is ready to phase out into retirement and the younger generation has to step into those shoes? How do you transition from the younger generation being employees to being in control of the business and transitioning the older generation out?
That is the age old question. But also keep in mind there are several issues that need to be addressed. One issue is, what happens if the founding or the older generation dies. That can be a huge financial impact to the business. Literally, all of the knowledge, connections and information goes to the grave with that person.
As is with any issue involving family, it’s not always cut and dry. First, we have the issue of death or retirement or disability of the founding member. But what happens if this founding member simply wants to cut back his hours or retire? How does the younger generation buy them out and compensate them throughout their retirement so they could afford to retire, while also affording to maintain the business and their income?
But keep in mind, the older generation needs to be compensated for all the value they created over their lifetime. Think of it this way, if they weren’t transitioning the business to the younger generation, they would have the opportunity to sell the business off to someone else at fair market value. Why should it be any different because we’re transitioning to a family member.
Now, surely there will be a family discount, but the older generation can hang around and can also be contributing to the growth or the sustainability of the business. And obviously all of that knowledge and those connections aren’t just going away.
So the key all comes down to this with proper legal planning and proper financial planning, you can ensure a smooth transition from one generation to the next. But with these steps become, an additional set of issues. You see, you don’t want to just have an agreement with no funding behind it, and you don’t want to just have funding with no agreement behind it. Having these together gives us a whole separate issue, though, of where are you going to find the money to fund this solution?
And that’s where we can help. We are specially trained to show you how to maximize the efficiency of your money so that you can get $1 to possibly do two or three or four different duties and in the process, make your money more efficient. Quite literally, what we’re able to do is to find money within your current cash flow without having to reduce expenses or without having to increase sales or revenue in order to fund this new plan.
It all comes through the lens of making your money more efficient and leaving you in more control of your cash flow so that you’re able to allocate some of that money to accomplishing your goals of buying your parents out of the business, while still being able to operate the business and grow the business all at the same time.
You see, what we found is that some simple shifts in how you’re using your money could make all the difference down the road. We recently worked with a business owner who owns a manufacturing company locally. He wanted to start planning his business exit strategy for about ten or 12 years down the line, and it was determined that the business was worth about two and a half million dollars.
So we started from ground zero, meaning that they had no money saved to fund his exit strategy. Now, also part of the backdrop to this case is his son was involved in the business and his daughter was a schoolteacher and not involved in the business. And he wanted to make sure that if he passed away, she would be compensated in some way, shape or form for his interest in the business. What we needed to do was to determine how much money he needed to put away in order to get that full value of his business. Two and a half million dollars. And it was determined that he needed to put away about $200,000 per year.
So now the question became, where are they going to get the money? He looked at me straight in the eyes and said, “Tim, if I could save $200,000, you better believe I’d have been doing that for a long time. I just can’t understand where we’re going to get the money”. And my response to him was, “What if you already have the money within your current flow? You’re just using your money inefficiently. If I can find the money, would you fund the plan?” He goes, “Sign me up“. And that’s exactly what we did.
We did a deep dive into their financials. We looked at where they were putting their money, how they were using their money, how they were making purchases. And lo and behold, we didn’t find $200,000, we found $240,000 of annual recurring revenue that they could use to fund his exit strategy. And in one fell swoop, we redirected money from an inefficient strategy to a very efficient strategy that was going to fund his exit strategy. But in the process, he got much, much more cash flow relief.
If you’d like to learn more about these strategies and how we could customize a plan to put them to work for your business, be sure to visit our website at Tier1Capital.com to schedule your free strategy session today. Or if you’d like to learn more about exactly how we put this process
to work for our clients, check out our free web course. The Four Steps to Financial Freedom.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
Capital investments are vital for any business to keep it growing and operating smoothly. But with interest rates on the rise, the cost of financing could feel quite daunting. How do you continue to grow and expand your business without being bogged down by the costs of new equipment and capital investments?
When you’re making a capital investment in your business. Any way you look at it. You are going to pay a finance cost. And what I mean by that is, if you finance, you’re going to pay interest to the bank or the credit company for the privilege of using their money. But if you pay cash, you are giving up interest that you could have earned on your money. So the question becomes, how can you make that capital investment in your business and still maintain control of your cash?
When you look at things through the lens of maintaining control of as much cash flow as possible, being as efficient as possible with your cash, now that decisions become much, much more clear. Now what happens is, instead of financing through conventional methods directly with a bank or a credit company, or instead of paying cash, if you maintain a pool of money that you own and control, and you borrow against that money. You fit the amortization schedule to meet your cash flow needs, ultimately it puts you in more and more control of your money while also making that capital investment.
And what we use for our clients is showing them how to use specially designed whole life insurance policies designed for cash accumulation to help finance the purchases within their business. And the reason why we use the specially designed whole life insurance policies is because the clients have complete liquidity use and control over their capital, every step along the way.
With these policies, there’s a loan provision so they have access to the capital on their terms. They could sign a form. It doesn’t hit their credit score and they get to determine the payback schedule of that policy loan. So they’re able to take money from the insurance company and invest it in their business with no questions asked.
So if the lens you’re looking through to make your decision on how to make this purchase is to be in control. You get the purchase, you’re in control of the terms and conditions, and your money is always earning uninterrupted compound interest. That is the same lens that we utilize to help our clients make their money much, much more efficient.
If you’re a business owner and you’re looking to get started with the whole life insurance policy designed for cash accumulation to take your business to the next level, visit our website at Tier1Capital.com and feel free to schedule your free strategy session today. We’d be happy to chat with you.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
As a young person, the thought of paying life insurance premiums until age 100 or 121 can seem a bit daunting. I mean, who makes commitments for that long, really? But here’s the secret. There are limited pay policies, policies that are paid for X amount of years. These policies can be a great saving solution for young people.
By its nature, a specially designed policy for cash accumulation puts extra money into the policy, and a limited pay policy has extra premium because you’re shrinking down the amount of years in which you’re paying the premium from age 100, let’s say, to age 65 or for a 20 year period or a ten year period.
The lower the amount of years of funding, the higher the premium. But again, if you’re designing a policy for cash accumulation, a limited pay policy makes sense because it puts you in a position where, let’s say a life paid up at age 65, there are no more premiums due after age 65. Now you’re collecting checks instead of paying premiums.
But let’s take a step back. We’re saying a higher premium. And what we mean by that specifically is, it’s a higher premium for the set amount of death benefit, which isn’t necessarily a problem when you’re designing these policies for cash accumulation. You’re focusing on the cash accumulation versus the death benefit. And many people, when they’re young, they don’t have a great need for death benefit. So it’s really not a deal breaker.
But the key is you’ll have the death benefit at your life expectancy when you’ll need the death benefit the most. And consequently, if you have a limited pay policy, again, let’s say a life paid up at age 65, by the time you’re 85, there will have been 20 years where you didn’t have to pay any premiums. But you had a completely paid up death benefit that’s actually growing every year because there’s no cost of insurance dragging the return or the growth of the policy.
In my case, I started limited pay policies years ago and it was a simple way to get started with saving. I put away a 500 or $1,000 a year into these policies, and in ten or 20 years they’re going to be paid up completely and the cash value and the death benefit are going to continue to grow and accumulate interest and dividends throughout my entire life, even after the premiums aren’t being paid anymore.
But keep in mind, there is a trade off with a limited pay policy. And what the trade off is, is that’s less money that you could stuff into the policy for any given death benefit. And what that means is your cash value will be slightly lower in the earlier years, but then you have to weigh the cost of having less cash value in the early years versus the benefit of having no premiums in the later years.
But let’s take another step backwards and think about compounding interest. Compound interest curves require two factors time and money. We all know we could never get time back, and it’s important to consistently put money in to these policies to accumulate the best compound interest curve possible. But with a limited pay policy, you’re limited on how much money you’re able to put in.
So again, in my situation, what I do is I have a term policy that guarantees convertibility of that death benefit, and I could create more whole life policies throughout my life as my budget allows. So as I pay up policies I have the cash flow to now convert a piece of my term policy into a new whole life policy and start the cycle all over again.
But the key is I’ll be building capital that I could access everywhere along the way to take care of the things of life, whether it’s buying a car, whether it’s going on vacation or moving across the country. Not to mention for business opportunities.
These policies are great for entrepreneurial type people. You have full liquidity use and control of that money to take advantage of business opportunities that come about. So you could earn an internal rate of return within the policy and also an external rate of return by starting your own business and putting that capital to work for you without interrupting the compound interest curve, which is key.
Nelson Nash, the author of the bestselling book Becoming Your Own Banker, put it so eloquently, “When you have access to money, opportunities will find you.”
If you’re considering a specially designed whole life insurance policy designed for cash accumulation, whether the traditional design or a limited pay policy to meet your needs, visit our website at Tier1Capital.com to get started with your free strategy session today.
You can hop right on our calendar, or if you’d like to learn more about how we put this process to work for our clients, check out our free webinar, The Four Steps to Financial Freedom. It’s right on our homepage.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
We’ve all heard that you should pay yourself first and save for your future. But not everyone does it. Are you saving for your future? Is it 10% of your income? Is it 15? Is it 20? Are you saving anything? And if you are, are you saving in a place where you have access to that money?
Today, we’re going to talk about how to strategically save for the future so that you’re able to meet your long term goals of retirement and your short term and intermediate goals as well.
So a universal financial goal that most people have is to someday retire. But what about your other goals? How do you achieve those as well as your retirement? We call that the savings dilemma. Should you save only for long term goals or should you save for short term goals or should you save for both? And the problem is, once you make a decision whether it’s short term, intermediate or long term, you’re literally eliminating the other choices.
In other words, if you’re saving for long term goals like retirement in a conventional, traditional retirement plan, that means that money is not accessible or available to you for the short term needs that you’re going to have from the time you start saving until the time you go to retire. We call that saving in buckets, but that’s not necessarily the best strategy because you can’t access that money without penalty before age 59 and a half.
But what happens when you want to get married or put a down payment on your house or send your children to private school? Where is that money going to come from?
Now, a lot of times people say, “Oh, well, by the time those events occur, I’ll be making more money”. Well, maybe you will, maybe you won’t. And in all probability you will. But that still doesn’t negate the fact that saving in buckets is a very inefficient way of saving. When we’re looking at savings vehicles for our clients, we’re looking at somewhere where they’ll have complete liquidity use and control of their money without penalty is everywhere along the way.
You see, you may be making more money in the future, but what you can’t recapture is the lost opportunity cost for those years when you’re building up your income. When it comes to compound interest, there are only two variables in that equation and that’s time and money.
With time, we could never make it up. So it’s important to start saving as soon as possible and never jump off that compound interest curve because you could never make up that lost time.
It’s often said the more time you have, the less money you need to put away. The less time you have, the more money you need to put away.
The key is if you’re saving everywhere along the way and you have access to that money and you’re never jumping off the compound interest curve, well now you’re in a position where your money is always working for you, but you’re also in a position where you could access that and use it for the things of life, those things that come up, whether they’re emergencies or opportunities.
The most frustrating thing in life is to have an opportunity come your way and you’re not in a position financially to take advantage of it. Why? Because you don’t have access to your money. You see, we believe that there’s more opportunity in protecting yourself against the losses than trying to pick the winners. Our goal is to help you make your money as efficient as possible so that you’re able to achieve your financial goals regardless of what’s going on in the market or the bigger economic environment.
And when we say losses, we’re not only talking about market losses, we’re talking about the lost opportunity of paying taxes, the lost opportunity of paying fees, the lost opportunity of paying interest to an entity that you don’t own or control, and the lost opportunity of having to access your money and jumping off the compound interest curve.
By utilizing the loan provision within these policies, they’re able to earn continuous compound interest within their policy and still access the cash value to make these major purchases or take advantage of opportunities. So you have the potential to earn an internal rate of return within the policy uninterrupted, as well as the opportunity to take advantage of financial opportunities that come up.
Another benefit of this process is that you’re always paying yourself first. You start where you are with what you can afford, whether it’s 5% of your income or 20% of your income, and you continue to save as a matter of course and your money continues to grow and compound within the policy and all the while you have access to it via the loan provision.
The value of this process is really startling because what happens is wherever you start, whether it’s saving 2% of your income, 5%, 10% over time, you get to a point where you’re saving a significant amount of your income and it doesn’t feel like it’s reducing your lifestyle. Why? Because you have access to all the money that you were able to save in those previous years.
So your savings percentage increases as well as your total net worth. As you build up the cash value within the policy, you have access to that cash to pay off credit cards, student loans, put a down payment on the house. This policy can go with you through all stages of your life. At the end, you have access to it to supplement your retirement income and ultimately to pass down as a death benefit to your loved ones or a charity of your choice.
If you’d like to get started with this specially designed whole life insurance policy designed for cash accumulation to help meet your savings and financial goals, be sure to visit our website at Tier1Capital.com to schedule your free Strategy Session today.
As business owners, we all know how important it is to have access to cash when you really need it. Are you thinking about taking a policy loan from your life insurance policy to help grow and expand your business?
Access to capital is the lifeblood of any business. Your business cannot continue to operate, and it certainly cannot grow without access to capital. But many times because cash flow is cyclical, we run into situations where our cash flow is not flowing in as quickly or on a timely basis as we need it. And there are the opportunities that you have that you may not even be considering where you can borrow against the cash value of your life insurance to keep your business going or to help your business to continue to grow.
Traditional means of financing require that you ask for permission by applying and ultimately qualifying on the bank’s terms to obtain access to their capital. But the reason life insurance loans are more preferred is because you are not applying and qualifying. You are literally giving an order.
The loan provision that exists in your policy is a contractual obligation, the insurance company has to honor your request for the loan. You’re not asking permission. You are literally giving an order. And that is not a small distinction. That’s why our business owner clients love borrowing against their life insurance. They are not qualifying. It doesn’t matter what their credit score is, It doesn’t matter how much money they have in the bank. It doesn’t matter what their cash flow is. The insurance company, when you call them up, they say, “Yes, sir. Where do you want us to send the money?”
So with these life insurance policy loans, they’re unstructured loans. So it’s suggested that you pay at least the interest back every year, because if you don’t, it will tack on to the balance of your loan. But other than that, you’re not required to make payments back to this policy loan. You get to determine the terms of these loans.
And that, again, is a key distinction. You’re in control of the whole process. You determine if or when you pay back the loan if or when you pay the interest. What that means is you can literally fit the payment back to the insurance company, into your cash flow. You can do it on your terms, whatever makes it best for you.
We’ve had a lot of clients who start paying back their policy loans and then they stop because cash flow got bad. They literally stop paying back their loans until a time in the future when their situation or the economic environment changed.
So you may be wondering, how does this the logistically work with the life insurance policy, the individual and the business entity? And the way we help our clients structure this is by first obtaining a policy loan to the individual as the policy owner. And then the individual is able to loan their business the money and the business repays the individual.
One of the key things that jumps out to a lot of our clients is the fact that they are completely in control of this entire process from the beginning till the end, and that is the power of utilizing the cash value in your life insurance to loan money to your business.
It’s our mission to help as many business owners as possible to make the best financial decisions possible. And a simple way to do that is to be in control of your financial process. So how could we help you make your money more efficient and put you in the most control of your cash flow?
Whether you have existing insurance policy is or you’re looking to get some put in place to achieve these financial goals or other financial goals like business succession, business continuation, deferred compensation, or other business financial goals, check out our website at Tier1Capital.com. We’d be happy to help you get started with our process.
What are you doing that’s holding you back financially? When it comes to finances, no one wakes up in the morning and says, “Hey, how could I mess up my financial future today?” No. We all wake up and say, “Hey, how can I move myself financially forward?”
We all need to navigate the headwinds that we all face, whether we’re business owners and we’re trying to navigate the headwinds that we face on a daily basis to move our company forward, or we’re a family and we’re trying to move ourselves forward financially. We all face the same headwinds. There’s the need for access to money, but if we don’t have money or more importantly, if we have money saved and then we need to access that money for an emergency or to take advantage of an opportunity, we’re going to drain down the tank. We’re going to use that money. And again, we’re never going to see the interest that we don’t earn on that money.
Then there are things like, let’s say you’re saving, there’s going to be taxes on your savings and investments. There’s going to be losses perhaps on your investment. There’s certainly going to be fees on those investments. All of those things are headwinds that we face on a daily basis. And then if we pay a tax, we pay a fee or we experience a loss, then there’s the lost opportunity cost. What we could have earned on that money had we not paid those fees or hit those headwinds or had those losses.
This is why we constantly talk about making your money more efficient. How do we work with what you have to get you as far as possible financially, whether in your family or your business?
Let’s say you have a plane that could fly 100 miles per hour, but you’re flying into a 345 mile per hour headwind. If your plane could only move 100 miles per hour, but you’re flying into that headwind, you’re going nowhere, and certainly nowhere fast. In fact, you’re not going nowhere, you’re literally going backwards.
So the facts are the facts. Your plane could only move 100 miles per hour and we have no control over the wind. But what if, instead of having a headwind, we adjusted the direction we were going and used it as a tailwind to propel us forward?
And that’s literally the type of planning we can help you with or the type of planning we designed for our clients on a daily basis.
We know that the winds are a given. The headwinds that we face are there. How can we work with those headwinds to make sure that we’re taking advantage of them so that now we’re using that wind to propel us forward rather than to prevent us from moving forward?
If you’re ready to make your cash and your cash flow more efficient and take advantage of the winds, please be sure to visit our website at Tier1Capital.com to schedule your free strategy session today.
Or if you’d like to learn more about how we put this process to work for our clients, check out our Four Steps to Financial Freedom Webinar right on our website.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.
