Using Life Insurance To Finance Your Business

using life insurance finance business leverage policy value

There are many ways you can turn personal assets into business capital, and your life insurance policy is one of them. A whole life insurance policy can be used to access much-needed cash to fund startup costs, pay off debt and cover regular expenses. While owning a small business is an incredible adventure, it is also a huge risk, so it's important to be prepared. You always have to be one step ahead when it comes to your company's finances. Learning how your life insurance policy could help you access funds when you need them most is a great way to invest in your future. 

What Kind Of Expenses Might A Life Insurance Policy Help Cover? 

If you borrow against or sell your life insurance, you are free to use the funds however you see fit. There are no stipulations on what you can buy, so you have complete freedom over how the money is dispersed across your business. This is extremely helpful when you may be facing a variety of costs and debts, including rent, employee salaries, supplies, utilities and cash flow problems. When a small business runs low on money, you'll likely be searching high and low for ways to scale back. But what if there was another way? Instead of having to cut your employees' hours or dip into your personal savings, you can use your life insurance as a safety net. 

Turning Your Whole Life Insurance Into Business Capital 

Imagine that you have owned your company for several years, but sales have been slow, and your cash flow is dwindling. Even though you are earning less per month, your bills remain the same. Expenses are quickly piling up, and you are more in debt than you've ever been. You have likely already taken a major hit financially, so you don't have any personal reserves to pull the business out of the hole. Instead of turning to high-interest loans or making drastic cutbacks, you could use your policy to gain the financial assistance you need. 

Whole life insurance generates a cash value based on payments made and interest earned. The longer you have the policy and make your premiums, the more money you'll have access to. You can review this guide on how to cash out your life insurance policy to get the money you need. Even if you're under the age when most companies buy policies outright, you can still explore other options for accessing the money your policy has accrued. 

Don't Forget The Tax Benefits 

Having life insurance comes with tax benefits as well, and these can be particularly useful for an entrepreneur. All of the dividends and interest your policy earns are tax-exempt, so you can rely on that form of financial growth to be entirely independent of anything you owe the IRS. This means you get to access all of the money when you need it and the opportunity to grow your wealth through a cash value and not pay taxes is of the utmost benefit to a business owner. Make sure that you fully explore all the tax benefits of life insurance to make the most out of your policy.

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