BEST Equipment Financing For Your Business

If I'm not paying my policy loans back at a higher rate than the insurance company's calling for, that money is certainly flowing somewhere and it's probably outside of my hands going to someone else's bank. So why wouldn't I pay back my loans at a higher rate anyway so I can control and accumulate and retain more of that capital?

Right.

We're not becoming our own banker or this or that. It is an and process. Everything that you're doing financially today is enhanced by implementing the process of becoming your own banker because you need banking to do anything financially.

So look, my colleague Dan and I are going to dive into an equipment financing example. We're going to show you exactly how you can use a permanent, participating, dividend paying whole life policy to implement the process of becoming an old banker, the infinite banking concept in Canada, to actually use it, you can use it to finance anything. But we're using a specific example of equipment financing and it sort of builds off example directly out of Nelson Nash's book. Isn't that right, Dan?

It is. And it's one of those sections of the book that, you know, I get questions quite often from different prospects and clients. And as they try to understand what Nelson was trying to help them understand as they go through that section, they get mixed messages coming back from people. So we thought we just, you know, not we'd build off what Nelson had in there. We'll talk about that part of his book and then we'll give a, you know, an example of hope, you know, of a way that you can understand what Nelson was trying to demonstrate through all those charts that Nelson put in the book under equipment financing. Now, a lot of people like that section, Vern, because there's charts and yeah, they love numbers.

I get it.

They're just like, there's numbers. Oh, yeah. And I can see the numbers and, and numbers are great. And I know just from what Nelson expressed at one point while he was still with us, God rest his soul, that he wished he hadn't put all those charts in there because people fixate too much on the numbers. But he really tried to educate people on one key concept in the equipment financing. And I think if we look at his book, Vern, let's just go to page.

58. And it's kind of a key piece that I area where I take everybody to when we start talking about equipment financing. It's page 58 and it's really just a little footnote that Nelson put in his book. And it's, you know, actually this interest is not really interest. It's additional premium brackets, capital that is paid into the policy that equals the interest that was being paid to the finance company.

Yes. This is so good. Dan, do you mind if I quickly just touch base and expand on what you're saying here?

No, go right ahead.

Ver to your point, what'll happen is, you know, Canada, you're reading the book and you're getting a sense of what's going on. The thing that Dan and I are really trying to highlight here is that numbers do not matter. Who cares? Ask yourself this question. Who is currently the banker in your life?

Exactly.

If it's not you, that means that someone else is dictating the terms by how you pay back loans. Someone else is getting use and control over the capital that you're working hard for. The money. The capital is already flowing away from you. So if by implementing the process, Dan, if I could get, if I could do, if I had $100,000 come passive income time that I wouldn't have had, had I banked the traditional way, would that be worth it?

I think so.

If you're going to come out ahead if you recognize that there's a problem called banking, who cares about the numbers? Now, don't get me wrong. I get that we need to look at your specific situation. We need to capitalize. We want to know what's going to happen. But my point is the numbers, if you understand the problem, the numbers are not going to be what makes you decide to implement the process or not. It's going to be really getting clear about the problem. But what happens is. I just wanted to preface that by saying I think people missed that footnote, Daniel, because they come to the call. What do they say? Hey, so when I pay back my policy loan with interest, like that's going to enhance my policy values, right?

Yeah, exactly. What we get all the time. And that's not what Nelson said. Because really what Nelson started to speak about is the fact that, you know, he coaches us and he coached us all the time. When you pay back your policy loans, you pay them back at an interest rate that's higher than what the life company is asking for. Well, why would he even ask us to do that? Vern?

That's a really good question. This is so great. You know what, I actually talked to somebody earlier today who actually owns a grocery store and I said, do you shop at your own grocery store? She goes, well, for the things that are here that I need, absolutely. I say, great. Now do you go at the back door or the front door. And she goes, wow. And she looks over at her husband and she goes, until he started busting my chops about it. I was going at the back door and I said, okay, great. But can you now see though how you're, you're stealing from yourself and you don't even realize it? Because I'm not paying retail costs for those goods. Well, if you pump that money back into your own grocery store, it's just more capital within your own grocery store that you can use to put to work, to grab more inventory, to sell to more captive customers to create a more profitable business. No different with the process of banking. I'm paying more interest back to my own policy system and to a company that I co own so that they can grow more profits, share more profits with us. But also I have more access to capital because I'm not losing anything. I'm simply storing it in a private system that I own and I control. I mean, gosh, I don't mean to laugh, but this is so ridiculously simple.

I totally agree. And it sounds like, because it's true, that we're putting more capital in if we follow the method that Nelson taught us. That's what his whole method was. His whole message in equality equipment financing is put more capital into your system as you utilize it. And if you understand how you can, you know, start paying yourself back at a higher rate and then figure out, how do I get that into my policy as premium, well, then you get to experience things very similar to what Nelson showed in his book through all those examples and those charts, how you can increase the actual value in that asset. So you put more capital, you get access to more capital, and it's just not dollar for dollar. He demonstrates how much more you will get if you aren't afraid to capitalize. I think that's one of his golden rules. Don't be afraid to capitalize.

Don't be afraid to capitalize. You just triggered a thought for me. Because the thing is, keep in mind Nelson's also, he recognizes that there's a people problem too. We have a lack of discipline. We're happy, we have everything that we need. And, you know, they may just have designed it that way to keep us, keep us focused on other things other than how we can actually create wealth in a very simple way. But what he says here Again on page 65, I know this is one of your favorite parts, and he says that everyone is already spending all financial resources on what he or she thinks is best There has got to be some honest introspection at this point and a commitment to get out of financial prison must be a burning passion. In other words, if I'm not paying my policy loans back at a higher rate than the insurance company's calling for, that money is certainly flowing somewhere and it's probably outside of my hands going to someone else's bank. So why wouldn't I pay back my loans at a higher rate anyway so I can control and accumulate and retain more of that capital.

Right.

And get it back to work for my family, no?

So well said, Vern. So let's just look at just the first paragraph of part four of the book called Becoming your own banker. And right now, if you don't have a copy of that book, we're both going to encourage you. That should be one of the first things you do. And the second thing I'm going to encourage you to do today, if you haven't heard about the infinite banking concept here in Canada, well, we're going to put a link right below here and you can just go to watchibc.com it's a 90 minute video, just helps you understand how this concept works. So again, just encourage you to do that. Now I'm just going to do a bit of a screen share and we're going to look at the first chapter of the book called becoming your own banker right at the start. And this is the only part I wanted to highlight for now out of the book. But there's lots of stuff that Vern and I'll be. We've already spoke about it, but I just wanted to go to this section and just see what Nelson started off this whole equipment financing section around and it was really this paragraph. So it is now that we have established the fact that dividend paying life insurance policy, a dividend paying life insurance policy has all the characteristics of a banking system. So if you understand the infinite banking concept and the platform that we use, which is dividend paying whole life insurance, you will know that it has all the characteristics of a banking system. Now Nelson goes on and said, let's refresh your memory of the steps it takes to get into the banking business and then use the system to enhance the things you're already doing within your regular line of business. So. Oh man.

So good.

This part is about that he takes you through a bit of a journey about, you know, just the steps it takes to get into the banking business. And that's covered in his book very well. And we're not going to get into all those details today. But it's just important that you, if you don't know that, you go to watchibc.com and take that 90 minute video in so you get to all that background information Here in Canada, this system works extremely well.

I just recognized in that paragraph how dynamic of a writer Nelson was. He said enhance and then he said your regular line of business. In other words, we're not becoming our own banker or this or that. It is an and process. Everything that you're doing financially today is enhanced by implementing the process of becoming your own banker. Because you need banking and to do anything financially, it's not a this or that, it's to enhance what you're already doing.

That was.

Anyway, sorry Dan, I just had to highlight that.

No, that's great because that's exactly what the equipment financing part of that book goes through. It's like Nelson shows through those case studies how that individual could enhance what they were doing financially in their life. So anyhow, what Vernon and I thought we'd do is we'd show you case study. Now this case study is, you know, very specific to a 35 year old. And you know, we're just going to take a quick look at it, then we're going to walk through it and we're both going to speak about it. For this male non smoker, 35 years of age and his starting death benefit with this particular policy was close to 400. Just, just under 400. And then on top of that we put a term rider for 50,000 and that's a term 10. Now that term 10 it will be, it'll stay at the same cost for 10 years and then after that you can keep it or you can drop it. In this particular case, you can see on line 13, this individual decided to drop his term rider. Now Vern, why would somebody maybe drop a term rider after 10 years?

Great question, Dan. One I have to point out is this term insurance that we're talking about is exactly what it says, a term. And it is a good solution for life insurance for a term. Where a lot of people get off track is they get term insurance and they keep it their whole lives and it just keeps getting more expensive and as they get closer to mortality and actually needing the insurance, they can either no longer afford it or it expires. But why would he drop it? What did he do? Well, first he could actually, Dan, couldn't he expand his banking system and convert that term insurance to whole life? He can actually convert that. It's a Contractual guarantee, non medical. We can convert that to whole life. And well, if we take a look at that column there, the fourth column over, it says total death benefit. And Dan and I will kind of expand on this as we go. But you can see that he started with 400 or $397,000 of whole life and $50,000 term rider. Let's round up and call that $450,000 of starting death benefit. God forbid he becomes an angel. Well, because we're capitalizing this policy and we structured in a way that your total death benefit is actually going to expand over time, which again, Dan and I can talk more about how that accelerates the cash values. The cash value growth is extremely tied to the growth of the death benefit because of some contractual guarantees that we'll mention. But the point is, if you look at line, even line 10 or line 11 there, the 11th year in the policy, and you look at the total death benefit, that's more than double the original starting death benefit, even with the term rider. So he's got well over a million dollars of permanent whole life insurance in place. May or may not really need that $50,000 term insurance anymore.

Yeah, well said, Vernon. Like you pointed out, in all likelihood this person would be converting at that stage. And just because he understands how much better of an asset, you know, dividend paying whole life insurance is an asset and it stays with you for your life. But anyhow, for this example, this case study we showed, it dropped off after 10 years. Now, when this person gets to the 11th year, he's going to make a decision as what he's going to do with it. But for this example that we're going through today, in this case study, it dropped off. So we just wanted to make you aware of why the numbers changed so the cost of that term rider come off after the 10th year. All right, so let's just look at a few things. Now, the other thing that this particular young man decided to do is he decided he was going to fund this policy for 10, 15 years. 15 years total is what he had in mind when he started. It's about capitalization. He determined that his capitalization.

Period was going to be 15 years. Now, if I take you to Nelson's book, page 87, when he talks about, you know, the glossary of terms, he talks about the capitalization phase. And Nelson says in that part of his book, you know, he says you want to capitalize for 10 years or more so that you have strength in your system. So this particular 35 year old, you know, he read the book, he understood all those pieces, and he said, well, I'm going to capitalize for 15 years. And that's what he did. So. So what this particular illustration shows is that after those 15 years, it drops. The premiums that he's paying annually drops to zero. Now, a couple other points that we thought we'd emphasize is if you understand how a dividend paying whole life insurance policy works, what's one of the key contractual guarantees that we take? Teach everybody. Vern?

Yeah. Thanks, Dan. This points out what we were kind of mentioning earlier. That is the death benefit and the cash value, that correlation, the total cash value is contractually guaranteed to rise on a daily basis such that it matches the total death benefit by the time the life insured reaches age 100. So as that death benefit's expanding over time, the window of time that the insurance company has to fulfill on that guarantee is shrinking. So there's forced efficiency within the contract. That policy cash values can only accelerate year over year and increase that daily growth.

Bang on. And as you see as I scroll down here, when Vern was speaking, that's exactly what happens at age 100. This happens in every illustration for dividend paying whole life insurance. That's the contractual guarantee that's in that contract. And those life companies have been doing it for hundreds of years and they're very good at what they do. So you can just look at this one and hey, you know, if we were just looking at it from a place to put money, how did this person do Vern, like, if he just saved up and put into this policy that premium that he first, you know, decided to put in. And, you know, I'm just trying to figure out, well, how much did he put in? Now, I should have been able to calculate that sooner, but.

Just shy of 300,000. Yeah, just under 300,000. And he put in. So if he gets all the way out to age, you know, 70 and he's got access to, you know, 90%, well, actually he's got access to all of that cash value, but if he took it all out, he would surrender the policy. But he could take and access 90% of that. How's he doing? He put.

I laugh because I go, look, keep in mind, Canada, that this is a contractual guarantee. This is a legally binding unilateral contract that you own and you control. Those cash values are not rising because this is an amazing investment tool. This is in no way shape or form an investment. It is an actuarial tool. It's a savings vehicle. And so those cash values, they cannot be taken back or reduced by the market conditions or what have you. These are the. Are the life insurance company is on the hook to make sure that that happens. And to that point, Dan, I wanted to point out one other thing. You had mentioned earlier that he. You kept saying he decided, he chose. This process is all about what you can do. It's all about your behavior. It's all about decisions that you make. In other words, if we go to age 100 and we see $2.9 million worth of death benefit, well, if you wanted that number to be higher.

All he would have to do is capitalize more and the policy would just work harder. It's really that simple. To your point earlier, Dan, you were saying, well, what, you know, sorry, I don't know how to cut you off, but you were saying, you know, what are some important contractual guarantees. You even talked about what we call premium offset. That's what we call premium offset. If Nelson tells us to capitalize for 10 years, in a lot of cases, Dan, can't we offset and stop depositing premium in as little as seven years? But to your point, if you're an engineer and you are building a bridge and you go, okay, the bridge can hold £10,000, aren't they going to enhance that by 200% to make sure that that sucker doesn't collapse? No different with this policy system. If I put in seven years and it can sustain itself, well, If I capitalize 10, 15, 20, and beyond, I know for sure I can turn that tap off and stop depositing if I chose to do that.

Yeah, that's so well said, Vernon. Like you pointed out. Be interesting if you had time just to pop in one more year of premium payments and see what the difference it makes over time. It's that uninterrupted compounding that happens with this particular product that's so great and does such a good job of supporting the infinite banking concept. So you use this as your bank. And so the other point that we wanted to bring up before we talk about the actual loan, we're going to look at the this person is going to use this system for. Is that all the way through this capitalization phase? So Whether it's year five, he had $100,000 of cash value. Well, he could take a policy loan for 90% of that and use it for whatever he needed in his business or in his life, depending on what his purpose was for this particular policy. Now, this particular policy this man plans on using it for his business. So he has lots of business expenses that he could be using as this capital keeps on growing year over year. So we're not going to get into all those details, but we just wanted to make sure you're aware he didn't have to wait till the 16th year to put this sucker to use. He'd have been using it well before then. And we just wanted to isolate all that noise just to help you understand what happens if he took out a policy loan and he paid it back at the rate that the life company was charging. So for this example today, what I thought I would show everybody is a very specific example of borrowing $360,000 for a piece of equipment. So this person had the need for equipment. He's been using equipment for a number of times. And he says, okay, when I get to this 16th year, which really was, you know, he took the loan out at the end of the 15th year, and he could, because this was his cash value, so he could take out 364,000. He decided to take 360 because that's what he was going to need for that equipment. And the life company that he was working with just happened to be charging 6.2% interest. So what we thought we'd show quickly here is that what happens if you just paid the policy back at 6.2%. Well, it's pretty straightforward. This is just simple interest. You know, he pays $38,349 every year. And after 14 years, because that was the period of time that he chose because he's the policy owner, that's the time frame he chose to pay back that piece of equipment. And objective achieved, he made it all the way down to there's no more debt at the life company. Well, the reality of that is after he's done so, that's 14 years. This is where his cash value got you didn't change it wouldn't have changed the cash value at all. That's the point we're trying to make here, because he didn't put any more premium into the policy. He just paid the policy back based on the policy loan he had and the interest that the life company was paying or charging. So he did that. He accomplished his objective. He got paid for the piece of equipment. And yes, his value increased over that period of time. His cash value kept on going up. Didn't stop, did it, Vern?

Not at all, Dan. In fact, you know, a lot of times there's a collapse in the conversation here. To your point, people think Paying back interest or even policy loans is going to enhance the policy value. All you're doing is replacing what you've used and or what you would have had access to had you not used the money. So a lot of times, Dan, people get confused when I tell them, look, you're not losing that interest. The insurance company charges you 6.2%. But what they do, without getting too complicated, I'm just going to make some simple numbers. We know we've established that the cash value is going up every day. And if my cash value was going up, let's say by $10 a day as an example, I could access 10 bucks every day. Well, once I borrowed a loan, there's going to be a simple interest rate charge on that capital. Now let's say that that interest works out to be $2 a day. Okay, well, 2 is a lot less than 10, so that's a positive. But the other positive, how that works is the insurance company is actually going to kind of withhold that interest amount, so $2 a day in this example, and they're going to give you access to the net amount above the interest, which in this example would be $8. So you're not losing any of that cash value. It's still growing at the same rate. That's why the interest, you can re access all of that interest because it just forms a part of the 90% that you would have had access to in the first place. And a quick second point I want to make, Dan, just because you mentioned the word noise before you share the next spreadsheet, if you share back at year one and two, for example, keep in mind folks like Nelson said, he gave us some golden rules to follow. And one of them is think long range. You can see that the cash premiums in year one were are 20,000 and the total cash value is, oh, it's only 16,000. How does that work? I put in 20. Okay, so you're building an entity, you're building a business that didn't exist before from scratch. It takes time for those cash values to accumulate. If you look at year five, that's approximately what I like to refer to as the break even year. But 100,000 in I got 100,000 of value and I've got this big death benefit. But now if you start to look at it even happens before year five. But if you look just roughly from year five to year six, you can see the deposits stay completely level, but the cash values grow by approximately $24,000 from year five to year six. Again, would you be real upset if it grew by 23,000? And the gap between what you deposit and the growth in the cash value is only going to widen over time. So again, quick milestone, if we looked from year 14 to 15, is that approximately 28ish thousand dollars of growth from year 14 to 15? Dan, is my math okay?

It looks more like 38,000. Vern.

Oh, sorry. Thanks, Dan. I've taken a lot of headshots as a young fellow. Math isn't the greatest, but the point is exactly. Now we've got live steam in the banking system. His premium dropped a little because we got rid of that term rider, but the cash flows increased by 38,000 bucks. Again, if it was 31, would you be really that upset? It's a heck of a lot more than what you're putting in. Okay, awesome, Dan, I'll turn it over to you.

Yeah, no, that was great. Comments, Vernon. It's just like, you know, as you can see, even though, you know, he wasn't putting anything more than what was required by the Life company to pay the interest, his cash values kept on going up all the time. And when he got that loan paid off after 14 years, he had $738,000 of cash value. And what by doing what? The only thing he did is he used it. And yet Nelson would have been teaching you, don't just pay it back at the rate the Life company asks you for, pay it back at a higher rate. So that's what we're going to show you in this next slide. It's just what happens if we paid it back at 10% instead of 6.2. Now in Nelson's book, he used 15 instead of 8. Well, we went 10 instead of 6.2. But this still gets you an idea of what happens. So the incremental $9,002 a year, because that's what it works out to. If you move the interest rate up from 6.2 to 10 for this size of a loan, it's $9,002 that goes into this policy as actual premium. It's not going back in, it's going back in as premium. And you can do that because you had the capability to do that. You could have been paying this premium at 19,730. And like we always tell people, your premiums can come down, they can't go up, but they can come down. Here's a classic example of how this particular individual could pay the extra $9,002. That's just based on simple, you know, Cost of interest difference between 6.2 and 10%. That's what it would amount to each year that he could take and put into that poll. This is capitalization. Vern did a great job of talking about. You put more capital in your system. You, you know, you teach yourself, pay yourself back at a higher rate. Then we teach you, we'll put it in as premium. This particular young man could do that because he had the room, and so he could easily put the $9,002 in. Well, if we look at the difference, all things being equal, at the end of the. Of that 14 years, again, he achieved his objective. His cash value now went. Okay, so let's do a couple things. Well, how much. Yeah, how much? How much more did he put in? That's my mind, Dan.

You read my mind.

So he put in an incremental $126,000,000 of premium. Now, if we look at the difference by going back to look at line 32 here, he had $738,000 in cash value in the original example. Now he's got 915. So is that more or less than $126,000 when you look at the difference?

I think that's a lot more. What was it, 738.

It was 738 to 915. And that's in this short window. Now if we go down and we look at, you know, again, let's go back and look at a Pacific time. By the age he got to age 100, it's 3.7. And let's just go back and pick a number. Let's just pick 85. And we say, okay, so at 85, now he's got 2.1.

2.15 million.

Yeah, 15 million. And what would he have in the other example of page 8 at age 85? 1.7.

Wow.

So the difference just becomes a huge difference. You can just see as it gets more time, because we're talking about compounding, uninterrupted compounding. It goes all the way to 3.7 from 2.9. Is the difference like at age 100, just that behavior. And Vernon talked about this earlier, the behavior that what this young man did, he didn't change nothing. He decided that his money had value, and when he borrowed against his policy, he decided, I want to put more capital in, and how can I do that? If I make a choice like Nelson taught us, to pay it back at a higher interest rate and we can put it in the policy like he did here, because he had the ability to do that. That's the difference it's going to make. Over time, his cash value is up. He can access more the next time he goes to use it. He just got more and more access to capital. This is about capitalization. And that's what Nelson was doing such a great job of speaking to. And our whole equipment financing part of the book. He was trying to get you to understand the power of capitalization. And he sure, the first illustration shows only four years of capitalization. And he walks all the way through to see how that would work. And it works like it, it, you know, if you did nothing with it, just capitalize it, set it on the shelf, it would continue to do what that contract's designed to do. And then he kept showing, well, if I used it and then I started to pay myself back at a higher rate than what the life company was charging me. And I was able to put part of that in because that's what he did. He put part of that interest that he was paying back to the life company because he chose to pay it back at a higher rate in as premium. And it just made a difference in the amount of capitalization. And really, I think the message was, hey, that was the business that young man was in in Nelson's book. He was in the business. He needed the access to that equipment. So why not do it in a way that he, you know, he created a business. Now, last things I wanted to do in this equipment financing section is talk about what Nelson put on the page 52. Everyone should be in two businesses, the one in which you make your living and the other one should be the banking business that finances whatever you do for a living.

Oh, Dan, that's so powerful. You know what? This is so good. Here's the thing, what we're highlighting here is the process. Becoming your own banker is not a product, it is a process. And you're already doing everything that you need to do to become your own banker. You're just not. You don't even know it. Right? So key things are Canada. Go to watchibc.com that's watchibc.com don't be afraid to leave a comment, ask a question, check out the plethora of great content that we have here, these, these playlists that we have beside us, and get a copy of Nelson Nash's book and take the responsibility into your own hands and think about what you can do to make the difference. And until next time.