Business owners are people.
Their dreams and aspirations mirror what most of us want in life – an uncluttered path to realize both personal and financial dreams. Their challenge is to find time to chart a course while simultaneously building and running their enterprise.
Business owners need our help to ensure their family is protected, their livelihood is sustained and their business has the right successor in place well in advance of retirement. But before reaching for your product toolkit, financial services professionals must think about listening first and prescribing later. Consider yourself a financial therapist.
Businesses differ by design, industry, and owner dynamics. And these challenges become more significant when that business is family owned. An owner’s success solutions and the combinations of products that may help him or her can be just as varied.
One treatment for the challenges business owners face in today’s uncertain market is whole life insurance. At one time, whole life was very popular and later overlooked in the business marketplace. But in today’s economic environment, many business owners are rediscovering its benefits.
Whole life insurance which grows in cash value over the life of the policy can assist a business owner in protecting, maintaining and leaving his business for retirement. How one will fashion a plan is dependent on where the business owners is today and where he/she wants to go.
A family business we helped recently with whole life is something worth sharing. The food processing and distribution business is the sole source of income for three family members. It had been in operation under this ownership for eight years, however, it had been an existing enterprise for more than 90. The business was often subject to cash flow fluctuations and had enjoyed a substantial line of credit with their local banker to fill in the gaps when cash levels were short.
The owners were current in their payments to the bank and always current in their payments on their credit line. However, as has been the case in recent years, the bank began to set about steps to reduce their line of credit, a move that would have jeopardized the business’ cash-flow need.
Had it not been for the whole life insurance that all three owners had owned for some time, their business would have likely failed for lack of cash. The owners were able to use the cash value as a line of credit until they were able to reestablish relationships with a new lender.*
The above scenario is not uncommon. In the last few years, many small business owners have experienced a cash flow and credit crisis in the tough economy. Many clients have not been able to borrow freely to reinvest in their business or product line because banks were not lending or lending less.