Today I give way to Gary Vande Linde.  This is an excerpt on an article he wrote several years back.

Infinite Banking – How it Works

By Gary Vande Linde

Why I am Interested in the Concept

Three years ago I left a large company, where I had served as the division

engineer for the past twelve years, to become part owner in a small business. The

owners hoped that the experiences I had would prove useful in creating a long range

plan for their business and developing a disciplined approach to the use of their

financial resources. I was comfortable with the methods and techniques needed to

implement these concepts since I had used and supported them in my previous role

as an engineer. The issues that I was not prepared for and frankly has been a

surprise, is the challenge that small businesses face in the procurement and/or

development of a source of working capital to fuel the growth and expansion of their

business.

As an engineer, working for a large company, having a ready source of working

capital was never a concern for me. Rather, if I could demonstrate that a particular

piece of equipment or machinery or change in our process would generate either

increased revenues or decrease cost enough to pay for the modification in two years

or less the money was on its way. However, in a small business setting I was soon

faced with the reality that although we could see many places where improvements to

our process would realize us huge benefits in terms of cost savings or quality

improvements we had a difficult time procuring a source of capital to help us

implement these changes. I soon realized that without some source of working capital

the rate at which we could grow our business was limited. It was at this time that I

began to talk with what I call “money thinkers” to see how other small businesses were

cracking this nut. One day an uncle of mine1 who does financial planning gave me a

book he had recently read on “The Infinite Banking Concept”. Andrew asked me to

read the book and said he believed the ideas could prove useful to me in solving some

of our business cash problems.

 

Upon first reading of the book, it seemed reasonable, sound, and caused my

imagination to explode with ideas. I immediately saw a method of building working

capital for our company that would solve several other problems simultaneously. At

the same time I found myself feeling skeptical. If this is such a good idea why are

other people not using it? How could something this simple work? Are the claims

being made true? How can I prove the ideas to myself? The list goes on and on. So

I took out a sheet of paper and began writing down every question I could think of and

every potential application that came to mind. I then began to contact people who

could help me analyze each question or opportunity. Over a period of about six

months I began to work through my list – adding new questions as they arose and

new opportunities as they became apparent. When I got to the point that I felt

confident enough to discuss the ideas in front of a group, I asked the members of my

investment club if they would listen to a presentation and help me evaluate the

strengths and weaknesses of the idea.

In preparation of that meeting I gave various members of our investment club

copies of Mr. Nash’s book and met with others individually to present the ideas over

lunch. My thinking was that the ideas run counter to what many people have been

taught and people need a little time to sort through the ideas at their own pace. I

believe that the ideas Mr. Nash is presenting are so simple and yet so powerful that

the natural reaction is to be skeptical – cautious. If people are rushed with an idea

that has such far reaching implications, I believe that they will reject the idea out of

fear that something is being sneaked past them.

The following paper was what I gave to the investment club ahead of time so

that they would have had time to familiarize themselves with the concepts. My goal

was to boil Mr. Nash’s book down to a paper with the basic ideas behind “The Infinite

Banking Concept” so that an individual could read through it in about ten to fifteen

minutes and have enough information to stew on. 

(to be continued)