As a business owner, you know that cash flow isn’t just about where your money is coming from, but also where it is going. Cash flow analysis looks at what expenses in your business are productive in terms of generating value and maintaining good cash flow and what expenses are destructive, not creating value, and contributing negatively to your bottom line.
When conducting a cash flow analysis of your business, we focus on productive expenses that increase business value, productivity and human capital, such as paying off debt, investing in business growth and enhancing human capital.
Conducting a cash flow analysis can help us help you look for ‘leaks’ or ‘destructive’ expenses in your business that are impinging on your cash flow and impacting business value and productivity. Expenses can include overdraft fees and other banking fees or unused cell phone plans. Leaks or destructive expenses can also be more complex, such as overpaying taxes instead of leveraging tax-saving strategies, paying for inappropriate insurance products and high-interest financing rates on loans and leases.
Our advisors are trained to find these destructive expenses within your business. We will work with you to create a corporate-owned participating whole life insurance strategy structured using on our Bank On Whole™ concepts, that are based on optimizing business cash flow.
As a business owner, you need control of your money and part of that is having access to capital when you need it, with a repayment schedule that suits your terms and cash flow needs. The liquid equity provided in the cash value of a corporate-owned participating whole life insurance policy, when structured using one of our Bank On Whole Life™ concepts, offers you near-instant accessibility to liquid capital when you need it the most.
A corporate-owned participating whole life insurance policy removes many of the loopholes and hurdles you would have to go through as a business owner to secure a loan or funding from a financial institution. This can include proving financials, securing bank loans with a lean, credit checks, having to provide a business plan or reason for financing, and waiting lengthy processing times to secure financing.
And when your company borrows from its corporate-owned participating whole life policy’s equity, it does so without reducing retained earnings and disrupting the growth in the policy. Although it’s advisable to follow a re-payment plan to replenish funding sources from the equity in your corporate-owned policy, you don’t have to about loan repayment as funds outstanding would be appropriated through the death benefit of the policy.
Access to Liquid Capital
The cash value of corporate-owned participating whole life, when structured using one of our Bank On Whole Life™ concepts, provides your business or corporation with accessible, liquid capital that builds equity year over year through guaranteed returns and potential dividend earnings. This equity provides your business with readily available capital you can use as a source of business financing.
It’s as simple as contacting one of our advisors to process the paperwork needed to access a policy loan. In a matter of days, the funds are released to you to use for whatever your business needs. From a financial strategy perspective, this is most advantageous to you considering your business doesn’t have to reduce it’s retained earnings because the policy becomes the place to access capital when needed and can be done without creating a taxable event.
Besides day-to-day costs of operating a business, other productive expenses are specifically targeted to business expansion. Corporate-owned participating whole life insurance policies structured using one of our Bank On Whole Life™ concepts, offers businesses like yours an alternative asset instead of going to financial institutions for funding, thereby creating more financial control within your corporation.
Leveraging the liquid equity in the policy’s cash value can give your business the funds it needs with relative, quick turn-around time while retaining earnings and without the hassle of providing unnecessary financials.
Meanwhile, wealth is still accumulating in your corporate-owned participating whole life policy because you are leveraging the equity, it’s cash value—not the actual cash—to expand and grow your business in whatever way you need from funding business acquisitions to purchasing new equipment, to cash flow, to business investments, to leasing office space or carrying out office renovations.
Sometimes your business needs may require you to leverage more equity than what your corporate-owned participating whole life policy can provide. Our advisors have been specifically trained and have the expertise in advanced lending strategies using projected cash values in a whole life policy as collateral security for a loan with a bank, such as an Immediate Financing Arrangement. As a business owner, you could receive nearly instant funding of the policy to free up cash flow to better operate or grow your business, all while building a larger estate to leave to your heirs.
Paying unnecessary interest is a destructive cost that can be alleviated with corporate-owned participating whole life insurance policy. With interest rates on credit cards and leases ranging anywhere from 10 to 30 percent, business debt can add up fast and as a result, interest paid on that debt.
The cash value of corporate-owned participating whole life policy, when structured using one of our Bank On Whole Life™ concepts, allows you to leverage the equity in the cash value through the withdrawal of a policy loan you can use to repay debt or use as a source of business financing.
Although interest is paid back on the policy loan, the way a corporate-owned participating whole life insurance policy is designed, allows interest to be recaptured when it is paid back to the place it was originally taken from—your corporate-owned participating whole life insurance policy. Interest is recaptured because the interest you pay the life insurance company is deposited into a Participating Account that is managed with low risk and diverse investments to create potential dividends. The interest paid is essentially recouped once your policy earns dividends. Even when you borrow from your policy, the cash value in your policy continues to grow uninterrupted and accumulate wealth.
Collateral Lending (CSV)
Additional lending options become available when a business owner’s corporate, participating whole life policy is used as collateral to secure other assets. This is known as Cash Value Lending and has been used by banks as a source of collateral for decades.
As a business owner, you can use the cash value of your corporate-owned participating whole life insurance policy as collateral to secure a bank loan from a financial institution. The tax advantage of this approach under current tax laws can create an opportunity for the loan proceeds to be received tax-free. As well, if the funds from the loan are used to generate income from business or property, the interest from the loan might qualify as a tax deduction.
Maximum amounts borrowed using this lending strategy is based on a specified percentage of the cash surrendered value. Although commonly between 50 to 100 percent, participating whole life insurance is usually considered less risky and more conservative than other insurance products, thereby generally falling into the higher borrowing limit of that range.
What is important to remember is that although your policy is collateralized, it’s tax-deferred growth is still available, and the death benefit remains tax-free upon payout. Cash Value lending is an ideal solution for business owners looking to create a retirement income fund (See Corporate Retirement Solution) and not averse to taking on a debt loan.