• The accumulated value in a corporate-owned life insurance policy provides a cash flow at a point in the future by serving as collateral for a bank loan.
• Either the corporation or the shareholder obtain a bank loan.
• Where the corporation borrows, funds flow out to the shareholder as a taxable bonus of dividend.

• Repayment of the bank loan occurs at death of the insured.

• The shareholder of a private corporation that requires life insurance protection. (i.e. key person, buy-sell, estate liquidity)
• Corporations with excess cash flow not required for business operations.

• Shareholders who want to access corporate dollars on a tax-advantage basis.

• Permanent insurance protection

• Use of "cheaper" corporate dollars

• Cash values are a corporate asset
• Tax deferred accumulation within exempt life insurance
• Access to cash values on tax efficient basis via bank loan
• Bank loan repaid by tax-free insurance proceeds
• Excess death benefit and other assets (equal to bank loan) paid out to estate tax-free

1) The corporation purchases and makes deposits into an exempt life insurance contract under which the shareholder is the life insured.

2) At a point in the future, the company borrows from the bank using the life insurance policy to secure the debt (up to 75% of cash value).  The company pays bonus / dividend to the shareholder.