The Infinite Banking Strategy for Canadian Business Owners: How It Works and Why It’s Effective
The infinite banking strategy is an increasingly popular wealth-building tool among Canadian business owners looking to grow their financial assets within their corporation or holding company.
Growth has rocketed especially since the federal government has been increasing taxes on everything – especially you and me, the greedy business owners who make “too much”.
By utilizing a participating whole life insurance policy, this strategy enables business owners to create a self-sustaining financial system that provides access to guaranteed credit in a couple of ways.
Now this is where we at Safe Pacific differ or veer off the “pure” infinite banking path. If you follow only “pure infinite banking” then you should hate banks and only ever access liquidity from your policy through policy loans from the insurance company.
That’s OK in the US where policy loans are always tax free and where they have many choices of which life insurance company to work with. The rules here in Canada are different so we’ve adjusted the core infinite banking strategy to suit Canadian business owner needs.
What we do is use both policy loans from the insurance company and also third-party loans from banks who are the bad guys in the original infinite banking book.
Loans against your policy cash values can be used for many things including to fund business growth initiatives like buying new equipment, expanding office space, hiring additional staff, or managing operational costs more effectively.
Unlike traditional financing options, the infinite banking strategy offers more flexibility and control because of the security of your policy’s collateral.
This financial model not only empowers businesses to achieve growth but also ensures long-term wealth accumulation within the company in a tax-efficient manner.
How Does the Infinite Banking Strategy Work for Canadian Business Owners?
For Canadian business owners, the infinite banking strategy is ideal if they have an operating company, a holding company, or both, and are seeking a reliable method to build wealth while maintaining liquidity.
This strategy leverages a whole life insurance policy, where the cash value grows over time, allowing the business owner to tap into this growing capital without tax penalties. The policy serves dual purposes: accumulating wealth and creating a tax-free credit source.
Here’s how it works for Canadian business owners:
Build Wealth Within the Corporation: By storing your excess savings in a participating whole life insurance policy, business owners can accumulate wealth within their corporation in a tax-efficient way.
Tax-Free Credit: The policy allows business owners to access funds through a mostly tax-free loan using the policy’s cash value as collateral. The business owner can also use the policy cash values to secure loans or lines of credit from a traditional bank at favourable rates and terms making this a flexible and convenient option for business or investment growth.
Fund Business Growth: The capital accessed through this strategy can be used to finance key business initiatives such as buying new office space, purchasing equipment, or expanding operations. This gives the business owner direct control over how and when to deploy resources.
Versatility for Other Business Needs: Beyond funding growth, this strategy is versatile and can also be used to cover other business needs such as funding a buy-sell agreement or acting as key person insurance as stipulated in a shareholders' agreement.
This combination of wealth-building and easy access to capital makes the infinite banking strategy a valuable tool for business growth and financial protection.
Why Canadian Business Owners Choose the Infinite Banking Strategy
Canadian business owners are increasingly turning to the infinite banking strategy due to its numerous benefits. Here are some of the key reasons why this strategy is becoming so popular:
Business Protection: One of the primary reasons business owners adopt this strategy is for the life insurance that protects their business in case of unforeseen events that could impact them directly. The policy provides a death benefit that can be used to ensure the continuity of the business, making it a crucial component of a company’s risk management plan.
Tax-Efficient Wealth Growth: As business owners build wealth within their corporation, they can do so in a tax-advantaged way. The whole life insurance policy's cash value grows tax-deferred, allowing for long-term wealth accumulation while minimizing the tax burden.
Access to Capital: Infinite banking provides great security for loans either from the insurance company directly or from a third party lender like a bank. This allows business owners to access their capital on favourable terms. It’s a quick and convenient way to fund business expansion, acquire assets, or address unexpected expenses.
Stable, Long-Term Growth: Unlike the stock market, which can be volatile and unpredictable, a participating whole life insurance policy offers steady, long term growth. This makes it an appealing option for business owners who prefer stable, long-term financial growth without being exposed to market fluctuations.
Expert Financial Advice: Many business owners are advised by accountants or financial planners to adopt this strategy due to its multiple benefits. Working with knowledgeable advisors ensures that the strategy is tailored to the specific needs of the business.
For Canadian business owners who want to protect their business, grow their wealth tax-efficiently, and maintain liquidity, the infinite banking strategy offers an all-in-one solution that addresses a wide range of financial goals.
Work with Expert Financial Advisors
Setting up an infinite banking strategy requires the guidance of experienced financial advisors who understand its complexities and benefits. Working with expert advisors ensures that the strategy is optimized for your business’s specific financial needs and long-term goals. We specialize in helping Canadian business owners in British Columbia, Alberta, and Ontario implement the infinite banking strategy to maximize their wealth and enhance their financial stability.
Our team of professional financial advisors has the expertise and knowledge to guide you through every step of the process, ensuring that you fully understand how the infinite banking strategy works and how it can be tailored to benefit your business.
Contact Us
At Safe Pacific Financial, we specialize in helping Canadian business owners, incorporated professionals, and investors structure life insurance for maximum wealth protection, tax savings, and business growth.
If you would like to discuss whole life insurance or investments, we’re happy to chat and see if we can be a good fit to work with you. Fill out our contact form and we will get back to you within 24 hours on business days.
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