For more information contact Insurative Risk Solutions US, Inc. at 877-281-1311
Many business owners have had encountered enormous challenges over the past few years. Reeling from pandemic-induced lockdowns, the subsequent labor shortage, and inflationary pressures, the day-to-day struggles of preserving enough liquidity to keep the business running have been seriously compromised. At the same time, procuring and retaining top talent has meant offering stability, meaningful benefits packages, and competitive salaries. Now more than ever business owners must find creative solutions to keep the lights on and the cash flowing. For the right situation, premium financing can offer a way to preserve cash flow while protecting company assets.
Premium financing in a nutshell
To understand premium financing, let’s break it down by the words themselves.
Premium refers to the money spent to keep a life insurance policy active. This can be paid monthly, in a lump sum, or other scheduled payment arrangement. In return for paying the premium, the life insurance policy remains active for the business or individual.
Finance refers to the financing acquired to pay the premium in the form of a loan to the business or individual.
With premium financing, a business purchases a life insurance policy through a life insurance carrier and obtains a loan from a lender in order to pay the premiums on the policy. In order to secure the loan, collateral is required. In some cases, the cash value of the life insurance policy can partially collateralize the premium loan. As with most loans, the lender charges interest. With premium financing, a borrower may be responsible for paying this interest to the lender. The loan will be repaid to the lender on terms agreed to by the business or from the cash benefit of the insurance policy itself.
Premium financing can free up cash for other business needs
For any business, the cost of life insurance can result in the loss of available cash to fund other investments and services. Liquidating assets to pay life insurance premiums may put the business at a financial disadvantage when their cash is leveraged elsewhere in the company. This is the sweet spot for premium financing.
The company can keep more of its money in the business to make payroll, expand services, invest in infrastructure, etc. At the same time, the policies themselves protect the business and its employees from the impact of future harm.
Today’s benefits are tomorrow’s stability
In order to recruit and retain top talent in a business today, benefits packages have become nearly as important as competitive wages. Offering comprehensive life insurance policies to key employees can create a serious cash flow burden on a company of any size. Premium financing may solve the cash flow problem while still offering attractive benefits to keep these valuable employees in-house and less likely to move to a competitor.
A business is only as strong as its team. The high costs of turnover are well documented in every industry. Premium financing allows businesses a way to compensate employees so that they stay while reducing the immediate expenses of offering benefits suited to their needs.
Premium financing requires diligent fiduciary-minded partners
There are many factors that can determine whether or not premium financing is right for any individual business. It is important to lean on the expertise of financial business planners in order to understand whether it is the right move economically. The team of experts at Insurative is here to help business owners understand the impact that premium financing can have on their bottom line.
As the world comes out of these challenging times, premium financing may be more relevant to maintaining the financial and competitive integrity of businesses that suffered hardships over the past several years. Insurative is here to help businesses with those hardships and offer cashflow-positive solutions for their recovery.
For more information contact us at 877-281-1311 or visit our website at insurativeus.com.