Now that you have your banking system set up, you can use it to fund the growth of your business–and so much more.
In a previous article, I covered the equation:
Intellectual Capital + Relationship Capital = Financial Capital
When you combine intellectual and relationship capital to create financial capital, you then put your financial capital in your vehicle and use your banking system to exponentially grow your business.
In this chapter, we’ll cover ways that you as a business owner can use this system for growth.
Financing Equipment
John owns a manufacturing business and needs to buy a piece of equipment that costs $50,000. He takes a policy loan from his banking system at a 6% interest rate to finance the equipment purchase. He doesn’t need to go through any Financing Equipment
John owns a manufacturing business and needs to buy a piece of equipment that costs $50,000. He takes a policy loan from his banking system at a 6% interest rate to finance the equipment purchase. He doesn’t need to go through any credit checks or wait for approvals, and he’s able to get the funds within 48 to 72 hours.
Instead of paying the loan back directly, John decides to issue a note to his business wherein the business will pay the loan back in five years at a 10% interest rate. This arrangement creates an internal revenue stream for John that generates income for him that gets put back in the banking system. The interest that is paid on the loan for the business is tax deductible. He can also benefit from the tax code to depreciate the equipment.
Over five years, in total, John pays $15,000 in interest on the policy loan at a 6% interest rate. The business paid John a total of $25,000 interest at 10%. John profited $10,000 from the spread of 4% between interest paid on the policy loan and interest received on the business loan. At the same time, that $50,000 was growing tax-free in the policy.
Down Market Opportunities & Marketing Investments
A client in the marketing business took a $100,000 policy loan from his banking system and used it to run a Facebook and Instagram campaign that generated 10,000 leads.
competitors to run a massive campaign. He closed 500 clients for a consulting offer of $2,500… His $100,000 investment generated $1.25 million in revenue.
When you have a banking system, you can capture opportunities in a down market, when your competitors are cash short and unable to play the game. While your competitors are struggling, you can continue to grow.
And let’s be real… A traditional bank would never give you a loan for a marketing campaign, regardless of how good your business plan is, even in a great market. Marketing campaigns are essential to generating more revenue by capturing clients, and a banking system allows you to use policy loans to invest in marketing and accelerate your business growth. You get to bet on yourself.
Investing In Other Assets
We all remember watching on the news as Lehman Brothers employees walked out of the building with boxes when the company crashed in 2008. And we all remember what happened after that… The financial markets around the world collapsed… There was a massive real estate collapse in the United States…
At the time, real estate investors believed you should have as many HELOCs as possible on all of your properties. The banks were loving it… Until they didn’t. After the economic collapse, what do you think the banks did to all of the HELOCs that investors had on all of their properties during the great financial crisis? They started to pull them and say, “Sorry, the product is no longer available.”
But if you had access to capital at this time, when the average housing market was down 40%, you could buy real estate at a massive discount.
Who had access to capital at that time? Real estate investors that had dividend-paying, whole life insurance policies with mutual life insurance carriers set up as a personal banking system. These people had guaranteed access to policy loans at a time when getting traditional loans was virtually impossible.
When you have your own banking system, you have capital available to invest in assets outside of your business, even at times when other investors are unable to get loans. You have the power to capture unique opportunities to build your wealth and continue to grow the capital in your personal bank.
Preparation Over Prediction
All of the stories in this chapter demonstrate that if you are prepared, you can take advantage of opportunities and plug cashflow leaks when needed.
But since we can’t predict the future, we have to lay the groundwork of preparation before the next opportunity or crisis arises.
You don’t know what’s coming–start preparing now.
Disclaimer and Waiver
Michiel Laubscher & Laubscher Wealth Management LLC is not an investment advisor and is not licensed to sell securities. None of the information provided is intended as investment, tax, accounting, or legal advice, as an offer or solicitation of an offer to buy or sell, or as an endorsement, of any company, security, fund, or other offerings. The information should not be relied upon for purposes of transacting securities or other investments. Your use of the information contained herein is at your own risk. The content is provided ‘as is’ and without warranties, either expressed or implied. Michiel Laubscher & Laubscher Wealth Management LLC does not promise or guarantee any income or specific result from using the information contained herein and is not liable for any loss or damage caused by your reliance on the information contained herein. Always seek the advice of professionals, as appropriate, regarding the evaluation of any specific information, opinion, or other content.
