Business Debt

Term Life insurance can help resolve business debt and ensure a smooth business transfer!

Business Debt Coverage  

Business Life Insurance and the ENHANCEMENT OF CREDIT 

Anything that stabilizes the financial position of a firm improves its general credit rating.

Life insurance can serve to enhance the credit of a business organization by indemnifying for the loss of a key person and/or assuring the continuation of the business in the event of the death of the owner.

Insuring the lives of key persons assures banks and other lending institutions as well as suppliers that the business will have a financial cushion in the event of the death one or more key personnel.

In addition, if a permanent form of life insurance is used, the liquidity of the business is improved through the accumulation of cash values. These cash values are show up on the business’s balance sheet as an asset.

Similarly, if prospective lenders or other creditors are assured of the continuation of the business, the business will not only be able to obtain a larger line of credit, but will usually be able to obtain it on better terms. 

Business Life Insurance used as Specific Collateral

§          A life insurance policy can be pledged as collateral. 

§          The cash value of a permanent life insurance may be pledged as collateral for a loan by assigning the policy to the lender.   

Under the arrangement above, the basic security for the loan is tied to the savings element of the life insurance contract, and the amount of the loan is always covered by the cash value available in the policy. 

§          If the borrower dies before the loan is repaid, the lender simply deducts the obligation from the proceeds.

Any excess to the obligation will be paid to the insured's estate or beneficiary.

In the event that the borrower is unable to repay the loan, the lender can recover its funds by surrendering the policy for cash or by taking a policy loan.

Normally, the loan is repaid at maturity and the policy is reassigned to the borrower.

A policy may also be pledged as collateral with a different purpose in mind!

The purpose may be to protect the lender only against loss arising from the death of a key person or the borrower.  

To the lender, the head of the business is usually the important asset. The lender may feel that while the business itself does not warrant another loan, the business plus the owner who manages it, would justify the extension of further credit; however, the contingency of early death must be provided for.

Life insurance may also be used as collateral in connection with bond issues.

TermLifeAmerica.com- Lewis Fink is licensed as an insurance agent offering Life Insurance in the following states: Alabama - AL, Arkansas - AR, California - CA, Colorado - CO, Connecticut - CT, Delaware - DE, District of Columbia - DC, Florida - FL, Georgia - GA, Idaho - ID, Illinois - IL, Indiana - IN, Iowa - IA, Kansas - KS, Kentucky - KY, Louisiana - LA, Maine - ME, Maryland - MD, Massachusetts - MA, Michigan - MI, Mississippi - MS, Missouri - MO, Montana - MT, Nebraska - NE, New Mexico - NM, New Jersey - NJ, New York - NY, North Carolina - NC, North Dakota - ND, Ohio - OH, Oklahoma - OK, Pennsylvania - PA, Rhode Island - RI, South Carolina - SC, South Dakota - SD, Tennessee - TN, Texas - TX, Utah - UT, Vermont - VT, Virginia - VA, and Wisconsin - WI.  

Not all insurance products from all insurance companies are available in all states.

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