According to Intuit, 61% of business owners around the world experience either cyclical or chronic cash flow issues. What we’re going to talk about today is how to use the infinite banking concept to put you back in control of your finance payments, even when you have these cyclical or chronic cash flow issues.
When it comes to owning a business, a lot of times people go into building a small business because they want to be in control of their destiny. They don’t necessarily want to answer to anyone, right? And they think that they could profit more on their own than working under someone else.
And everything goes smoothly until they have to get a loan for their business. And then the bank comes in and makes them sign two times once for the business and once personally that personal guarantee. And it’s at that point, at that exact point, that they realize, oh, I’m not in control.
Because the bank is now controlling the finance function in your life. And here’s the deal. They’re not just controlling the finance function; they’re controlling the cash flow. And that’s why Intuit, when they did their study, realized that 61% of business owners around the world are literally suffering from chronic and cyclical cash flow issues. Why? Because the business owner is not in control of the financing function. I bet that closely correlates to the other study that said 68% of business owners either sleep less or lose sleep over cash flow because of that cash flow issue and the stress that’s caused by it.
Because now they owe the bank. When you get a loan, you get a coupon booklet. Or if you get a credit line, you’ve got to pay the interest every month. And so you’re obligated to make those payments. That brings us to the subject of our blogpost today, which is unstructured loan payments.
When it comes to the infinite banking concept, one of the best features I feel there is, is number one: guaranteed access to the cash value. As long as there’s cash value built up in your policy, you have access to it. And number two: when you take a policy loan, it’s an unstructured loan. Right? So you tell the insurance company, “Okay, insurance company, send me X amount of money.” And they say, “Okay, where do you want me to send it? I could send you a check to your house, or I could put it in your bank account. No big deal.” But the key here is there’s no coupon booklet. You get to pay that loan back as quickly or as slowly as you see fit. We do recommend you pay back at least the loan interest on an annual basis, but other than that, it could fit into your cash flow.
So it’s recommended that you treat your money just as you would treat the bank’s money and have those intentions. So maybe that looks like setting up a loan for 10 years and paying 10% interest back to the loan. Okay? But let’s say five years down the line, cash flow changes. Maybe you’re expanding your business, and so cash flow is tight for the time being. You’re able to cut back if you wanted to reduce those payments or stop the payments for a period of time with no penalty. Right? The only thing you have to consider is the loan interest being charged on that loan.
But the key is because the loan is unstructured, you have the option to fit the monthly payment if you choose to have a monthly payment into your cash flow, rather than the bank dictating what your monthly payment is going to be. That’s number one. But number two is you also have the option of not paying, of paying interest only, of paying it back in a short window let’s say a two- or three-year period or a longer window at, let’s say, a seven- or ten-year period. The key is that it’s your choice, and that’s the value of an unstructured payment fitting those payments into your cash flow rather than making your cash flow fit into the payment.
This is a huge deal, right? Because think about it: if you own a business and you have cyclical cash flow issues let’s say you are a shed business owner, and people buy sheds in the summer mostly, right? That means all of your cash flow is coming in those summer months. But during the winter months, it’s not so cash-flush. So maybe you make higher payments during the summer months when you have that cash flow and then you cut back during the winter months. But the key here really is once you make those payments back to the policy, you have access to that money again, right? So it’s not like you’re making these payments and they’re going to the bank and then you’re never going to see them again unless you qualify for that money. Again, with the life insurance policy loan, you’re rebuilding your pool of cash that you have full liquidity, use, and control over, that you’re able to access again if and when you want to.
And again, that’s not a small distinction. You get to access the money that you’ve already used to pay down the loan, and you get to use it again no questions asked. You know, when you go to a bank, you’re asking permission and seeking approval. When you get a loan with an insurance company, you are giving an order. That’s not a small distinction.
Another thing to consider is that all along the way, you are paying your premiums, right? Whether it’s on an annual, monthly, quarterly, or semi-annual basis. So when you pay back your policy loan, plus you’re paying the interest, again, you’re building that pool of cash. So you’re able to finance larger and larger purchases as time goes on, and that policy becomes more efficient.
And not only does it become more efficient, but now your cash flow becomes more effective. And that’s the key. You’re now in greater control. And the control issue we’ve talked about it a lot in this blogpost but the control issue is paramount. That’s why business owners went into business: to be in control. But now, when you control the financing function in your business life, now you’re in complete control.
Well, I think another factor that needs to be placed in this and emphasized is the death benefit, right? Because now, in either situation whether you have a policy or not you’re making that purchase. There is the debt, right? Whether we’re financing from a bank or we’re financing from the policy. But when you have that policy, now you have a death benefit associated with that. So whether that’s your family or your business owner who’s going to come into the business after, they don’t necessarily have to worry about coming up with the money to pay off that loan. They don’t have to worry about liquidating assets or selling the business. They have a death benefit that’s going to be reduced dollar for dollar for any outstanding loan. Plus there’s going to be death benefit associated with it. So exactly when they need money, they’re going to have it. So they’re not forced into those hard decisions of selling off assets and selling the business.
And that’s a great point because literally built into their financing mechanism is a mechanism to extinguish the debt at their death. That’s an awesome feature. Would you rather a death benefit or a personal guarantee, right? Because if you have a personal guarantee—Well, now you put it that way, I guess I’ll take the death benefit. If you have a personal guarantee, doesn’t that mean your estate’s responsible for paying back that loan? And that’s a lot of pressure for the executor of the estate, right?As if there wasn’t enough pressure.
If you’d like to learn more about how to implement the infinite banking concept and these policy loans into your plan, visit our website www.tier1capital.com and click the “Schedule Your Free Strategy Session” today. We’d be happy to chat with you about your specific situation and how we could put this to work for you to make your cash and your cash flow as efficient as possible.
Remember: It’s not how much money you make, it’s how much money you keep that really matters.