3. Test an opportunity against a bad year
Lesson 3 of 5 · A Capital Strategy for Successful Business Owners
3. Test an opportunity against a bad year
Imagine an owner considering $40,000 of equipment expected to improve production. Compare cash, conventional financing, and—if sufficient policy loan value already exists—policy financing. Use the same equipment cost and repayment timeline.
Separate the equipment’s projected return from the financing cost. Include policy premiums and costs, loan interest, loan balances, liquidity, and the possibility that sales disappoint. An appealing illustrated cash value does not establish the profitability of buying equipment.
Now reduce projected sales and delay customer payments. Could the business still meet payroll, taxes, operating expenses, and debt service? Could your household still meet premiums if you reduce owner distributions?
Your exercise: Make a one-page comparison showing the cash reserve after purchase, total financing costs, and payments due in both an expected year and a difficult year. If the plan requires an uninterrupted best-case outcome, revise it before committing.