Optimize Your Business Cash Flow with Infinite Banking Policy

Foreign, You're adding another asset that you're going to be able to utilize as an effective storage location of flowing capital to be able to do the things that you want to grow your business. Well, what's an example then? Pick any example. Like there's, you know, there's so many businesses. You need to get a piece of equipment. Great, it's a truck, it's a car. Perfect. Borrow from here, buy it. You don't have enough to get that done. It's a, it's a $200,000 truck. Because you have, as an example, maybe you have a car hauler business and you've got a truck that can have like nine cars on it, you know, one of those double decker vehicles. Okay, great. So that's maybe that's $150,000 price tag. Well, if you don't have enough in your pile right now in cash in the bank, or you don't have enough in the system that you've built for the policy, exactly what you identified, Jake, maybe you need to finance it with a third party to get started, right? But then as you're building this up, you could take chunks out of that or you could say once you're at a point where you've got a balance, okay, you've got this one now at 75 grand and this loan is down to 75. Can you now absorb that third party debt instrument, move that over into your control in your system? Your system continues to rise and the payment that you used to give those guys is just going back into this pool. It brings the loan down. Meanwhile, the policy keeps growing and it's just, you just continue on. You now have a machine that is growing more efficiently every single day, while that piece of equipment is becoming less efficient every day because it's got more miles on it and you're gonna have to replace it probably another five years. So if you know you're gonna have to replace that piece of equipment every five, six, ten years and you're not building up a methodology that will allow you to control the replacement, isn't that the real problem?

Yeah, very good points. And what's interesting too is that when we hear questions around what happens in the event of me selling or exiting the business, or how does this infinite banking concept help with retirement or shareholder buyout planning? And that's where there's some misconception or misunderstanding. So the infinite banking concept is a process, right? That's what the business is implementing throughout the day to day operations of the company. Whereas when you start to get into the business owner's retirement phase or key people in the company, other shareholders, or you get into a buyout situation because of death, disability, involuntary or voluntary termination or a variety of possibilities There now we're dealing with the utilization of the tool, which is corporate owned dividend paying life insurance. And that tool has very specific attributes that once the business owner understands what those are, they're incredibly appealing. The corporation has the capital, so the corporation pays the premium. The corporation is the named beneficiary, the insurance contract, so that there's no taxable benefit conferred to the shareholders. The corporation utilizes the policy loan provision to control how it finances all the things that it needs. And then in retirement phase or in a buyout situation, there's ready access capital and we're able to take care of the planning element and we do that on a tax free basis. And meanwhile, the entire time that the business was operating and that asset, that policy or system of policies was growing every day, it was exempt from the passive investment income tax rules in Canada, not triggering any taxable event. And with proper planning and execution, there was no taxable event triggered throughout the, the entire journey right up to death of the life insured and after death of the life insured. So the corporate owner, the entrepreneur, the business owner says, okay, let me get this straight. Company pays premium, the cash values begin growing immediately on a daily basis. Can't go backward, not triggering any taxable event on the buildup. When dividends are declared annually, they're contractually guaranteed to be paid. They can't be repossessed, they can't lose value ever. We can contribute almost unlimited sums. We're paying no tax on the death benefit proceeds. We're able to fully satisfy our desired outcomes for retirement planning and shareholder buyout planning. How much capital can we flow into that tool and how long can we run that capital through that tool? Because that is where logic kicks in. There's no other tool that delivers the attributes and the outcomes that we're describing. And so what an, what an amazing position that it puts that business owner in.

I give you an example exactly what you're talking about, Jason. So I showed an example earlier this morning. I had a lot of fun on a great conversation with a couple of younger guys and they're have a great business going on. We were looking at a $200,000 example for their business and the, the, the, the minimum. Just to keep things simple, let's just say the minimum requirement was 50,000. Just to keep the math real simple. Well, if they funded it for the first five years with a 200,000. Okay. So they've put in 200 for five years. They've put in a pretty good chunk of capital. They had, they had an asset value of cash value that was greater than all that. That amount. Okay. In the, in the second to the third year they put in their 200,000 and that same year it grew 212,000. So I mean that's a pretty good bank account if you put in 200 and at the end of the year there was 212 in it. Well, from an asset perspective. Yeah. Now what was interesting about this is I showed them if, what if they just stopped and didn't put any more in at year five. Not because I would suggest that. I said that's not what the right thing to do. That's not their behavior, but I just wanted to show you the impact. And then, so then I said, okay, the next example I showed is what, what would happen if you just kept paying that 50,000 minimum? Well, in year six, if they put 50 in, the machine grew like 100.

That's incredible.

So why, why would you stop putting the 50 in?

Logically.

Logically, right. And it's, it's, it's not to say that that's, it's, it's not some magical tool. We're not, it's, we're not create, it's not an investment. We're not creating this magical money out of thin air. It's just about recognizing that we built a business that is very efficient. And now every time that a dollar goes into the business, the business creates more dollars over that same year for the, for the equivalent injection of capital. And as you continue to do that over a period of time because they were young gentlemen, the ability for that to multiply actually becomes very high. So you get to a point later on where now you're 20 years into the business and for every dollar that you put in, it's creating 3, 4, 5, 6, 7, maybe even as many as, maybe not as high as $10, but it's creating a lot of extra dollars of usable capital. Right? Not just capital, usable capital, the ability to take working dollars using collateral. The beauty, the beauty of collateral. Other opm, other people's money. All the real estate investors want to use opm. Well, the OPM you get to use is the insurance company and you co own them. You are a part owner in that big pool. They're going to let you tap into that big pool and put it to work for your needs at the Same point that you're doing that. They are putting it to work for the needs of everyone else in that pool, which includes you.

It's an incredible model. And you're absolutely right. I mean, it's the insurance contract. So it's a contract for time and money. And we're the only profession that can bind the policy owner to the life insurance company using a contractually guaranteed promise to pay. A contractually guaranteed accumulation that occurs daily, a contractually guaranteed payout. And you can never pay in more than what the insurance company is going to pay out. It's contractually impossible. And so naturally the business owner asks the question, how does the insurance company make money? Well, the insurance company, think about it from this vantage point. If you were to look back at any of the economic calamity that we've experienced over the past 100 plus years, pick any instance. The Great Depression, H1N1 Covid the tech bubble bursting. The Internet bubble bursting. Black Monday, Friday, Tuesday, Wednesday. However many stock market collapses have occurred, Life insurance companies remain the most financially solvent institutions on the planet. They're going to be just fine. They're making plenty of money. Double digigit returns on policyholders equity. So if you know that you can get into a business that is producing double digigit returns on policyholders equity, and when you become a policyholder, you become a co owner of the company producing double digigit returns on policyholders equity. How much capital do you not want flowing there? Because to add to your point where you demonstrated, you said, hey, I just want to show you what happens after year five. If all you did was pay the minimum required premium or you just didn't have any additional capital outlay. Well, if you recognize that your money must reside somewhere and your business is going to be bigger five years from now than it is today. If I even introduced putting less capital into this asset, you should fire me as your advisor. If I even remotely suggested that you stop putting capital in. Your business is bigger. You have to store more money somewhere. What you should be is pissed off at me that I didn't create more room to put more capital in. And so that's where we flip the script and the business owner goes, that makes perfect sense. It's so logical. Isn't that good?

It is good. I had a little query that I just asked Grok while you were saying that just because you sparked me around like return on equity and stuff for mutual companies. And it says unlike stock based insurers, mutual companies don't aim to maximize shareholder value. Instead, their goal is to balance profitability with policyholder benefits. Return on Equity tells you how well they're doing this for business owners exploring this option like, you know, incorporating ibc, what have you. Return on Equity offers a great insight into the insurer's ability and stability to deliver on promises like dividends that directly impact cash value growth and death benefit growth. In a policy.