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Business Protection

and Growth Strategies

Let’s be honest, everyone wants their business to succeed. But what if the owner retires, becomes disabled or passes away? What plan do you have in place to assure your business thrives and your dependents are financially secured? 

What is a Buy-Sell Agreement?

A buy-sell agreement is a legal contract that articulates what happens with the business when a partner exits.  A buy-sell agreement is a critical part of small business succession planning. While there’s a lot that can go into a buy-sell agreement, the main things to include are the trigger events (retirement, death, or disability of one of the owners), buyout structure, the value of the business, and how the agreement will be funded (with insurance or some other way).

A legal agreement, no matter how articulate, has no power unless it’s funded.  

Funding Your Buy-Sell Agreement

There are several different ways to fund a buy-sell agreement. However, the most common and efficient way is with life insurance. A Buy-Sell Agreement funded with life insurance can be a life preserver for your business. At one of your most vulnerable moments, this protection strategy can provide the infusion of capital needed to create longevity, sustainability, and viability of your business.

However, this element of business planning often gets forgotten and stuck in the mental file of nice to have, but I’ll get to it later.  And that can be a fatal mistake.

business men reviewing documents

Leveraging Your Buy-Sell Agreements to Earn a Return on the Same Money in Two Places at the Same TimE

While term insurance may have a proper place in your business as well as your personal financial strategy, permanent insurance provides important long-term benefits. A properly structured buy-sell agreement funded with whole life insurance can provide you the protection you need AND liquidity, use, and control of business assets. When strategizing for long-term success, term insurance is almost always an expense to a company, while permanent insurance can provide both short and long-term liquidity, tax savings, and other benefits that can far outweigh the costs. 

Insurance is an asset in business, helping business owners solve many of their top financial challenges. A Buy-Sell Agreement funded with whole life insurance will build a pool of capital that can be used as leverage or collateral for the business to borrow against in the form of a TAX-FREE loan in accordance with IRS guidelines. This capital can be used for business opportunities such as buying equipment. As long as IRS guidelines are met, you’ll continue to earn uninterrupted compounding interest on your policies’ cash value even while using it for other opportunities ~ hence making your money work for you in two places at the same time.

Leveraging Example

You have $300k in your whole life policies that fund your buy-sell agreement. You want to purchase a piece of equipment for $100,000. You could finance or pay cash but you would then pay interest or give up the opportunity to earn interest on your $100k? Had you been able to invest the $100k at 5% compounded monthly over the next 20 years, the $100k would have earned you an additional $171,264 without taking on additional risk. That is the opportunity cost on your money for one business transaction. It is simply money your business is losing unknowingly and unintentionally by only using your dollar for one purpose only. 

By leveraging the cash value from your buy-sell policy, you can borrow $100k against your policy and pay interest on that loan AND still earning interest on the 300k essentially getting a return on the same dollar in two places at the same time. The cost of your loan is NET ZERO. This strategy allows you to invest in your own business, provide protection and maintain control and use of your capital.

Learn More

Buy Your Tomorrows Today!! If you want to ensure the continuity of your business, a buy-sell agreement funded with life insurance may be your ideal solution. Boston Cash Flow Financial can help you with your business succession plan. Simply schedule a consultation by calling (508) 472-3777 or requesting an appointment online.