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)
