Richard Canfield explains how business owners use dividend-paying whole life insurance to build accessible cash reserves. Cash value grows tax-deferred and guaranteed, and you can borrow against it within days without income verification. Premiums can be structured so you have borrowing capacity almost immediately for operational needs.
Chapters
In addition to what you described, you know, I haven't personally met or worked with a business owner who didn't sleep better at night when they had readily accessible cash on demand on their terms to either take advantage of a great business opportunity or to smooth out some variability or seasonality in cash flow. And by the same token, a lot of entrepreneurs and business owners, they co mingle positive net income with cash flow. And there's a big difference between the two. You can have a profitable business and have very poor cash flow. And if you think of the essence of the infinite banking concept, right, putting someone in a position of total control over how they finance the things that they need in their company, and just by virtue of putting money in the form of premium into corporate owned dividend paying life insurance contracts on key people in the business, you're not only solving for cash flow because of the cash value accumulation that occurs on a daily basis. You're paying no tax on that buildup. It's contractually guaranteed so it can't go backward. These are things that business owners tell us. They, when they understand it, they truly value it because they know that that component of their balance sheet is continually rising in value and they can borrow against it on demand. No income verification, no review of the past two years of corporate financials or tax returns, no personal guarantees. It is a very peaceful, stress free way of existence for a business owner and an entrepreneur when you have ready access to cash flow. And so that's how this concept in many ways can be helpful. But that was one of the primaries. The next question that came up was how soon can I access money? Very common question. So what would you say to that?
I love that because that is often a barrier of entry for people because they think that they're going to have to leave things tied up for a really long period of time. And when you're making decisions in the business, you need a degree of liquidity. In Nelson's book, of course, all of Nelson's examples, he doesn't show anyone using a policy in the book earlier than the fifth year. Okay. And the reason that he did that is, number one, it's a static book so he couldn't be there to tell you and give you ideas and suggestions on the fly. So that's number one reason. Number two, he wanted people to understand and recognize Parkinson's law. And that if you could commit to doing something for a number of years, then you would have a very strength, very strong, durable business, at least in relation to a whole life policy. At that point that you could pretty much do whatever you wanted. So there's a couple of reasons for that. But actually in the equipment financing example, he said in his live seminars he would say, well, you notice that there's enough to go buy a trip, buy a truck at year two. So what would happen if we didn't then wouldn't that make everything better if we're being an honest banker in the situation? So it wasn't that he's suggesting don't do anything for three or four years. He was just suggesting what would happen if you could commit to this. How, how, what would that look like from you, from a, from a mindset, human behavior perspective. But the reality is, I would say a large amount of our clients, Jason, and maybe this is different for yourself, but a large amount of our clients, they start working with the policy almost immediately, within that first year, oh, 100%. I personally suggest and recommend to my clients that I want them to take a policy loan within the first 45 case now, even if they don't need the money. And it's not because I want them to have an outstanding loan to the insurance company, it's because what, in my experience, the people that practice taking policy loans and get accustomed to the, the, the, the push button mechanics, the email, the signing a document or what have you receiving it in their bank account, making a loan repayment, even if they're just sending it all back right away. Now the life insurance company probably doesn't want you doing that. They're like, why did you just take this money, take 10 grand and now you're sending it back to me three weeks later? Like that was really strange. But if you have to go through that whole rotation, there's a great deal of learning steps that take place. Maybe you're working with a financial controller or you know, your accounting team and they have questions or comments, or there's someone who's kind of like you're the visionary and you're trying to lead the direction of the business and someone's dealing with the paperwork and they want to know what's going on will give them the opportunity to experience that right away. Don't wait 12 months or 18 months or 24 months to all of a sudden need a great gob of money and not have any idea what you're doing. That doesn't make any sense. So the earlier you begin the process, even if it's for testing, the better you become at it's just like riding a bike. You have to get on and get started you got to figure out how to get that stability so that you're not falling over with the bike. So you can use money with most policies very, very quickly. There's the odd contract, not one that we work with very often, but there's the odd contract where maybe they might have a restriction with that particular company that says you can't access a policy loan maybe for 12 months, okay. But far and wide, that's usually not the case. Most people are able to access policy loans within the first 30 days, often within the first seven days, once the policy is submitted, paid, and everything's been put together. Here's a great example. Let's say you've got business. They want to. They're going to run $200,000 worth of their revenues through a policy. All right, most of that, a good chunk of that is earmarked for their profits anyway. But they're running capital through a policy. They have a minimum requirement and they have a maximum. So 200 is the ceiling. They can't go more above that. But let's just say, for the sake of our example, 60,000 is the minimum. Okay, well, at 60 grand is five grand a month. So what if you made a monthly payment of $5,000 and you got the contract started and then you had money sitting in reserve in the, on the bank account, and you could put 140,000 effectively into the policy as a premium to buy paid up insurance immediately, and you could do that virtually on day one. You would create a large amount of borrowing potential off of that premium that was paid and the death benefit it created, it would create a corresponding cash value, which means borrowing potential. So you could immediately begin practicing this right away. And now you have a commitment of five grand a month, and then you carry that forward for the rest of the year. But meanwhile, you're, you're practicing things right away. So the ability to access capital right away and get going and get, get operational can be very, very fast once you get through the application process. So coaching process, policy design, application, boom. Now you can get going.
I met with a swimming pool, like a company that essentially helps you design right through from design to your first dip in the pool.
Like, I've got a gentleman like that in my strategic coach group.
Yeah, really good business. And so he operates out of the province of Ontario in Canada. And when he asked the same question, how soon can I begin to implement the process? Like, how soon can I access a policy loan? So obviously I responded, in that case, it was right away. So the moment that the policy's in force, you can begin right away. And I said, one thing to think about is we would often share with people, you can't learn how to swim unless you get in the water. But what I shared with this entrepreneur is I said, when you finish a pool for a customer, if you told the customer, congratulations, the pool is done, but you can't use it for another 12 months, how's your customer going to feel about that? And he said, well, not good at all. They want to use that pool right away. And of course, with whether, you know, he does a lot of indoor pool designs with some, some really beautiful, like, indoor pools that are just amazing.
