Use Your Money Twice: Why Business Owners Should Consider an Immediate Financing Arrangement

 If you’re a successful business owner that is banking cash and paying more in taxes than seems fair, you are probably open to ideas on how to do more of the former and less of the latter.

An Immediate Financing Arrangement (IFA) is one of those rare strategies that lets you do just that — use your money twice, get tax advantages, and strengthen your long-term estate plan.

Here’s how it works...

The Core Idea: Use Your Money Twice

An IFA pairs a corporately owned participating whole life insurance policy with a bank loan. You pay premiums into the policy — then immediately borrow back that same capital using the policy’s cash value as collateral.

Immediately after borrowing the money back, you invest it however you best see fit in your business; buying a building, putting it back into your portfolio - anything that is intended to help your business grow.

You still own the life insurance, but you're not tying up the money you are contributing to buying the policy. 

When you die, the policy pays out the benefit - tax free - to your corporation.  Your corporation then pays off the outstanding loan and the rest of the benefit is flowed out of the corporation to your family, tax-free.

I'm not allowed to say it's 'free insurance' for compliance's sake, but it's pretty close...

The Tax Advantages

The loan interest that you pay annually is tax-deductible if you use the money to earn more money - the government incentivizes you to put more money into your company, create jobs, or invest in the market. 

The policies cash value grows tax deferred - it's like a TFSA for your business investment account.

The death benefit is paid out tax free to your corporation and is flowed out of your company - also tax free in most cases - through your Capital Dividend Account (CDA). 

The topic of CDA is a blog or two on it's own, but the gist is that it is a line item on your tax filing that your accountant keeps track of.  Higher CDA is a good thing, these policies create huge CDA accounts - which allow you to get money out of your corporation tax free at death.

Who It’s For

TikTok will tell you that this strategy is for everyone - it is not.

This strategy works wonders if you:

• Own a profitable private corporation

• Have large (and growing) cash balances in your corporation 

• Have a need for life insurance

• Hate paying taxes

• Are comfortable with the idea of (smart) debt

It’s especially attractive for entrepreneurs who want to invest and need insurance — but don’t want their capital tied up in an insurance contract for the next 20 years. The IFA solves for that.

Final Thought

Most financial decisions are a trade-off. An IFA is the very rare example of 'having your cake and eating it too'.

It’s not magic. It’s just a smarter way to use capital you were going to spend anyway.

If this might work for you, shoot me an email - [email protected]; happy to see if it is a fit!