In theory, the answer is yes. However in practically, we do not use High Early Cash Value Riders (HECVRs). The reason rooted in premium financing suitability. HECVRs come at a cost, which creates a drag on the cash value accumulation. When we receive a HECVR request in the design, it is usually because the client does not have the liquid collateral to post. If the client does not have the liquidity required to qualify for a properly designed premium financing arrangement, perhaps they should not be premium financing. This is a suitability issue. Premium financing is most suitable for a client that has the liquidity to easily post more liquid collateral in the event that: The policy's index does not perform ideally (which would result in lower CSV credited) The client's collateral value drastically reduces due to a major market correction In either case, the client would need to produce additional collateral, hence they must have the liquidity to weather either of these temporary storms. If they do not, perhaps they should not be premium financing.

Our software compares the same client outlay in our premium financing proxy being invested in a hypothetical investment account using S&P 500 historical returns for the "equities" portion of the portfolio, and historical 10-Year T-Bond returns for the "bond" portion of the portfolio. We run through the 122 different 40-year historical periods analyzed and show an apples-to-apples comparison for each client. If the results show that a non-insurance based investment account produced a substantially better outcome than the backtested premium financing proxy, perhaps premium financing is not suitable for them. However if the backtested proxy performs better in the Best 40, Worst 40, and Most Recent 40 scenarios, perhaps premium financing is something worthwhile to consider. We also show a comparison between the premium financing solution and a non-financed policy using the same product from the same carrier. To best answer this question, we transparently model an apples-to-apples-to-apples comparison, having analyzed 122 different actual historical 40-year periods, and let the math speak for itself. No other premium financing intermediary has this software... nor the ability to transparently model any of these stress-tested depictions.

Unlike most premium financing intermediary firms, Lionsmark Capital has four different financing platforms to suit the specific needs of your clients. Below is a brief description of some of our platforms. FIRST-DOLLAR FINANCING (FDF) Client borrows 100% of the premium and pays interest-only each year until the loan is paid off (typically sometime between policy years 11-20). This design requires the least out-of-pocket cost in year one (the interest-only due on the first year's borrowed premium). It also requires the most amount of outside collateral of our various platforms. PARTIAL-EQUITY INTEREST ACCRUAL (PEIA) Client pays 33% of the annual premium out-of-pocket, then borrows the remaining 67% of the annual premium, and accrues 100% of the interest due each year until the loan is paid off (typically sometime between policy years 11-20). This design can be attractive for the type of client that likes having a set/fixed annual contribution (instead of the variable interest outlay of the First-Dollar Financing platform). It also requires outside collateral. This design is for the client that doesn't mind the risk of the compound debt that occurs due to accruing interest, and is betting on a positive arbitrage over time between the borrowing rate and the policy crediting rate. Not all carriers allow this type of premium financing platform (e.g. Pacific Life and Penn Mutual). SECOND-YEAR FINANCING (2YF) In this design, the client pays the first-year premium out of pocket. Borrowing starts in year two (hence the name "Second-Year Financing," and pays the interest out-of-pocket each year on the cumulative loan balance. There is no interest accrual in this design. In concept, paying the first-year premium is like "posting collateral inside the policy," and in most cases, the policy will serve as the sole collateral with no outside collateral required. Due to the policy's 0% floor, this "internal collateral" is protected from market crashes. THIRD-YEAR FINANCING (3YF) In this design, the client pays a fixed annual contribution for 10 years (similar to the PEIA platform), however the annual premium is reduced in years 1-2 (100% paid for by the client with no premiums financed), then in policy years 3-10, the client continues to pay the same annual contribution in the form of premium, but the actual policy premium increases to 4X. The lender pays the excess premium, and the client accrues the interest until the loan is paid off (typically sometime between policy years 11-20). This design does not require any collateral in years 1 & 2 (because borrowing does not start until year 3), however it does require some outside collateral starting in year 3. The collateral is approximately 90% less than the PEIA plaform due to the first two years of non-financed premium. This platform can be ideal for a client with a high income but may not have a substantial amount of liquidity to post as outside collateral. SIXTH-YEAR FINANCING (6YF) In this design, the client pays a fixed annual contribution for 10 years. In years 1-5, the client contribution equals 100% of non-financed premium. In years 6-10, the client pays a combination of partial premium and interest on additional borrowed premium (typically 3.5X-4X the annual premium in years 1-5). In years 6-10, the combination of partial premium and interest equals a similar amount the client paid in years 1-5. Our proprietary algorithm calculates this complex premium design to work optimally based on the client's age, health, etc. For carriers that do not allow interest accrual (e.g., Pacific Life & Penn Mutual), this design works well because it is similar to Third-Year Financing (3YF) without the use of any interest accrual. COST RECOVERY This model can be achieved using any of the aforementioned premium financing platforms. If the client is young enough, and the goal is a specific net death benefit amount, we will design the policy wherein the client can take a certain amount of policy drawdowns from policy values to recover their out-of-pocket costs (hence the name, Cost Recovery), while still maintaining a net death benefit similar to the desired amount. This is sometimes possible in the event that cash values increase due to index performance wherein the death benefit would have increased beyond what the client needs. The cost recovery feature - if allowable per the client's age, health, time horizon, etc. - results in a Zero Net Cost for the client. RECORDED WEBINAR If you would like to see us present some of these different loan designs, CLICK HERE to watch a recorded webinar of us reviewing these designs along with a demo of our proprietary backtesting software capabilities.

There is no minimum death benefit amount in order to premium finance, however there are some minimum requirements that carriers, lenders, and Lionsmark have. Below are some general guidelines. CARRIER REQUIREMENTS Different carriers have different net worth requirements for premium financing. Below are some examples: Penn Mutual: $15MM Pacific Life: $10MM Nationwide: $10MM Transamerica: $5MM Securian: $5MM National Life Group (LSW): $2.5MM (up to age 49), $5MM (ages 50+) Lincoln: $2.5MM (ages 30-50), $5MM (ages 51+) Allianz: $1MM, or $500K NW (with $200K income), or $0 NW (with $400K income) Carriers also have age restrictions as well. Typically the maximum age allowable to premium finance is age 70 with most carriers, however sometimes special exceptions are made based on our relationship with the carrier and the client's unique situation. Each individual case is different, but these are some general guidelines to keep in mind. LENDER REQUIREMENTS Different lenders have different net worth requirements for premium financing. Typically, carrier NW requirements are more strict than lenders, however some lenders have minimums that may be higher than the particular carrier the client wants to use. For example, Allianz may have a low NW requirement, however if the lender with the lowest rate requires a minimum of $1MM in borrowed annual premium and a client NW of $15MM, we would be forced to use a lender with a lower NW requirement. Some lenders require the client to move their collateral to be managed by the lender, and some lenders allow the client to keep their collateral managed by the current custodian and just "post" the assets as collateral (for more information regarding collateral requirements, click on the "Collateral Requirements" section on this FAQ page). Some lenders have a national footprint, and some lenders only lend regionally (restricted to certain states). This is why we work with over a dozen different lenders to find the client the most favorable loan rates and lending terms. And lastly, we have lenders that will loan as little as $100K in annual premium, however the borrowing interest rates are not favorable at this amount currently (as of 2022 Q4). Realistically, premium financing starts to make sense at a bare minimum of $300K in borrowed annual premium. LIONSMARK REQUIREMENTS Average annual premiums we finance are typically between $500K-$1MM per year, typically either 7-pay or 10-pay policy designs. We've financed substantially larger policies, and on some rare occasions, we've even financed policies as small as $250K in annual premium (our minimum). In regards to minimum client contribution requirements if they want to use our smaller-case design for retirement income (Third-Year Financing), the minimum client contribution requirement is $100K in years 1 & 2, then $50K in years 3-10. For more info on our Retirement Income design platforms, CLICK HERE. For more info on our Death Benefit design platforms, CLICK HERE.

Each carrier typically has a maximum age they will allow for premium financing (typically age 70). Some carriers will make special exceptions based on a unique set of circumstances. However in practical/mathematical terms, the upper limits wherein premium financing makes sense are typically: *Age 72 - Preferred Health Rating *Age 67 - Standard Health Rating Premium financing "will work" beyond these thresholds, however the advantages are not substantially better than a non-financed policy (which makes the value/risk proposition not attractive enough). Each case is different, so the general rule of thumb is to give us the fact pattern, and we can discuss whether or not premium financing is a suitable strategy for that specific client).

The risks revolve around three main variables: Borrowing interest rates Policy cash value perfromance Client collateral To account for these variables, we build a proxy for the premium financed policy, testing each of these three variables. We analyze 122 different 40-year historical periods and highlight: 1. The 40-year period that produced the Best Compounded Annual Growth rate (of the 122 periods) 2. The 40-year period that produced the Worst Compounded Annual Growth rate (of the 122 periods) 3. The most recent 40-year period, matching S&P 500 returns with historical Prime-based loan rates No other premium financing intermediary has the software to model such variables, which we think is the most important set of variables to understand (and mathematically/transparently model).

Premium financing lenders will run an inquiry at the beginning of the underwriting process, however the debt is not reported to the credit bureaus. This means that premium financing loans will not negatively affect the client's Debt-To-Income Ratio (DTI) or hinder their ability to qualify for other types of loans (e.g. Mortgage Loans, Business Loans, etc.).

Our software can model the potential participating loan arbitrage between the index credits in each backtested year and the participating loan rate. One of the major benefits of an IUL is the fact that the index credit is applied to the Gross Accumulated Value, not the net Cash Surrender Value. When taking a participating policy loan (aka "index loan" or "alternate loan"), the policy loan amount continues to receive the index credit based on the floor & cap proposition, while the client is charged the participating loan rate on such policy loan. The full proposal our software generates shows this positive/negative arbitrage during each year in both the "Best 40" and "Worst 40" backtested scenarios to help the client decide whether or not the participating loan proposition is a viable proposition. In Darren Sugiyama's book Premium Financing - The Key To Effective Estate Tax Planning, Chapter 5 is dedicated to explaining how the various policy drawdown options work. This book is available in eBook format to download for FREE on our website. It is also available on Amazon at https://www.amazon.com/Premium-Financed-Life-Insurance-Effective/dp/0989261964

Because our backtested reports are NOT life insurance policy illustrations (they act as a proxy for a premium financed arrangement), we do not show any death benefit projections in these reports. In a real world IUL, the death benefit would be calculated using the carrier's "corridor factor" and multiplying such corridor factor by the cash value. However, we believe there is great value in comparing the "Accumulated Value Net Of Loans" column in our backtested reports to the: As-illustrated cash value assuming the carrier's static index credit As-illustrated death benefit assuming the carrier's static index credit In a real world IUL, the cash value cannot exceed the death benefit (due to non-MEC designs), hence in a real world IUL, if the cash value increases to a value greater than the as-illustrated death benefit, the actual death benefit would be automatically increased to a value greater than the actual cash value. It is often times valuable to explain this concept to a client while showing them the different outcomes in the "Best 40" and "Worst 40" scenarios comparing the "Accumulated Value Net Of Loans" in the proxies to the as-illustrated cash value and death benefit in the carrier illustration.

Our proprietary software creates a proxy for the premium financed IUL. We call it a "Leveraged Hypothetical Synthetic Asset." It is essentially a ficticious asset that behaves similar to an IUL in the sense that: Its growth is correlated with the S&P 500 Its growth is restricted by a floor and a cap Charges are removed before the EOY index credit We then analyze 121 different historical 40-year windows of S&P 500 performance, and run the proxy's model through the 40-year period that produced the BEST Compounded Annual Growth Rate (CAGR) and the 40-year period that produced the WORST CAGR. The intent of this backtested analysis is to give the client a better understanding of a range of potential outcomes using an instrument that behaves similar to an IUL. For more info, click on "Videos" on this website in the top toolbar, and watch the webinar clip titled "Our Backtesting Software."

We work with multiple lenders with multiple lending platforms. Some lenders use SOFR, CMT, or Treasury rates as the base rate, and the lender adds a spread on top of the base rate (typically between 1.00%-2.95%)... and some lenders use the Prime rate as the base rate, minus a spread (typically between 0.00%-1.50). We also have some lenders that offer multi-year fixed rates. We even have a Switzerland-based lender that has a currency exchange loan program that is a SARON-based rate. Current rates are <4.00% (as of June 2023). There are typically price breaks at $500K in Annual Premium Borrowed (APB), as well at $1MM in APB. If we design a case wherein the requested death benefit solves for an annual premium close to a price break, often times it will make sense to increase the annual premium so that your client receives a more favorable borrowing rate (due to hitting the price break), and paying off the loan earlier using the policy values. Often times, this adjustment can result in a lower total out-of-pocket interest expense for the client, yield a higher initial face amount, and produce a higher low point net death benefit. Based on the multiple lenders Lionsmark Capital works with, borrowing rates depend on a number of variables including: 1. Client Net Worth 2. Client Liquidity 3. Whether or not the client is willing to move collateral (or just post it from their current institution) 4. Type of Collateral (e.g., Cash, Marketable Securities, Letter Of Credit, Real Estate, etc.) 5. Amount of Premium Borrowed 6. Paying Interest vs. Paying Partial Premium and Accruing Interest on Additional Borrowed Premium 7. State of Client’s Primary Residence 8. Ownership of Policy (e.g., Trust, Shell LLC, Operating Business, Individual Person, etc.) 9. Length of Loan Term (e.g., 1-Year, 5-Years, 10-Years, 20-Years, etc.) While other premium financing intermediaries just offer generic loan terms from one lender, Lionsmark Capital evaluates the client’s unique situation and preferences, and finds the lender with: 1. The lowest rate 2. Most fitting loan terms, specific to the client’s preferences Each case is different, and we will design the most mathematically prudent premium financing design for your client on a case-by-case basis.

Will premium financing work in a high interest rate environment? This is one of the most frequently asked questions. The simple answer is, "Yes, and it works even better." In our backtesting software - for each client proposal we build - we show the historical relationship between the S&P 500 performance (with the IUL product's floor and cap) compared to historical borrowing rates (using historical Prime-based interest rates). The reason this is so valuable is that contrary to a simple veneer perspective, borrowing interest rates are not the determining factor of whether or not premium financing is feasible. The REAL determining factor is understanding the symbiotic relationship between historical borrowing rates and historical S&P 500 performance (which affects index performance and IUL policy values). Our software models the most recent 40-year period (1982-2021) and builds a proxy for the premium financing proposition using the historical index performance matched up with historical Prime rates. The EOY 1982 Prime rate was 11.00%, just to give you an idea of the interest rate environment during that time. Our software will produce a transparent report showing several different historical interest rate environments and historical S&P 500 performance so you and your client can see how this symbiotic relationship between these two factors impacts financial outcomes. This is perhaps the single most important element to understand when it comes to premium financing... and Lionsmark Capital is the only firm with the software to be able to articulate these financial outcomes during these historical backtested scenarios. For more details on this topic, we have a webinar recording on our website that takes a deep dive into this issue. CLICK HERE to watch this webinar video.

Different lenders have different loan terms. Some are 1-year annual renewable term loans wherein the client must be re-underwritten each year (submitting an updated tax return and an updated PFS). We also have some lenders with 3-year and 5-year loan terms. The nice thing about a multi-year term loan is that the client is underwritten at the beginning of each term (as opposed to every year). Some of these multi-year term loans have fixed interest rates for the entire term, and some only lock in the interest rate for 12 months, renewing the rate annually (despite the multi-year term loan period). Rates for 1-year annual renewable loans are typically lower than multi-year term loans, but not always. We will review your client's financials and choose the lender with the most favorable loan terms and rate based on your client's preferences and qualifications.

We have lenders that offer multi-year fixed rates: These types of loans are great for clients that are concerned about interest rate volatility. There is typically a pre-payment penalty with this 5-year loan term. Such penalty is assessed as follows: Hypothetical Pre-Payment Penalty Example (with one of our lenders): 7.35% 5-Year Fixed Rate - 6.35% New Lower Variable Rate (hypothetical future rate the client wants so switch to) 1.00% Difference (savings) x 2 Years Left On Loan Term 2.00% Penalty x $2MM Outstanding Loan Amount (client wants to refinance this with another lender) $40K Pre-Payment Penalty ***Some of our lenders do not have a pre-payment penalty and offer a rollout to a variable rate in the middle of the fixed term (if rates are favorable for clients to do so). Here are how fixed rates are calculated with this other lender: Hypothetical Example: Cash or Securities As Collateral: 5-Year Treasury (4.62% as of 4/17/2024) + 2.00% = 6.72% Real Estate As Collateral: 5-Year Treasury (4.62% as of 4/17/2024) + 2.75% = 7.37%

Some lenders charge origination fees, however most do not. Most lenders do charge a loan document fee because they outsource the creation of the loan document to a third-party law firm, and they pass such fee on to the client. In most cases, lenders allow this fee to be rolled into the total loan amount. Loan document fees will range from $4,500 -$7,500 in year one, then a reduced amount in subsequent years (typically $1,500-$2,500). If the loan is a multi-year term loan, typically the loan document fee is only charged at the beginning of each loan term.

Some lenders require the assets to be moved and managed by the lender, and so lenders accept the client merely posting their assets as collateral (via control agreement) wherein their accounts can continue to be managed by their current money manager. For example, if the client wants to merely post their existing marketable securities investment portfolio as collateral (assuming the lender allows this), their current money manager can continue to buy/sell/trade within their account as they normally would, as long as the account balance does not dip below the lender's collateral requirements. Should this happen due to a reduction in investment account value, the client would be required to either add additional funds to this account, or post another lender-approved investment account as collateral. Typically, lenders that require the collateral assets to be moved to them to manage offer lower borrowing rates.

We have a variety of lenders on our platform that accept different forms of collateral. Most lenders will accept: *Cash (typically credited an advanced rate of 100%) *CDs (typically credited an advanced rate of 100%) *Bonds (typically credited an advanced rate of 90%) *Marketable Securities (typically credited an advanced rate of 20%-75%, depending on the portfolio) *Cash Value of existing life insurance policies (typically credited an advanced rate of 95%) *Real Estate Equity (see details in "Can real estate be used as collateral" FAQ) Lenders will NOT accept: *Business valuation *401(k) or IRA *Cryptocurrency *Assets held overseas

We have THREE (3) lenders out of our eighteen (18) lenders on our platform that allow clients to use Real Estate Equity as collateral. The property requires formal appraisal (done by a lender-approved appraiser). The appraised value is then typically discounted by 25%-50%... then any existing mortgage debt is subtracted... and the remaining value is what can be used as collateral. Each of these lenders accept being in 2nd position behind a single mortgage lender, but not 3rd position (wherein there is an existing 2nd mortgage in place). Here are the requirements of each of these three (3) lenders: LENDER #1: Annual Rate: 1-month SOFR + 2.75% Rate Resets: Annually Origination Fee: $2,500 (one time for 5-year loan term) Loan Doc Fee: $4,000-$6,000 (one time for 5-year loan term) Appraisal Fee & Title Fee: $2,000 (one time for 5-year loan term) Real Estate Value Collateral Credit: Appraised value minus existing mortgage debt minus gap between loan balance and CSV must equal no less than 50% of appraised value Policy Cash Value Allowed For Partial Collateral: 95% of CSV run at 0.00% index credit Interest Due: BOY annually Interest Accrual: Not allowed Minimum Required Liquid Assets Moved To Lender: None LENDER #2: Annual Rate: Prime minus 0.00% Rate Resets: Annually Origination Fee: 0.50% on total 5-year loan amount (one time for 5-year loan term) Loan Doc Fee: $15,000 (one time for 5-year loan term) Appraisal Fee: $450 (one time for 5-year loan term) Recording/Closing Fees: $1,500 (one time for 5-year loan term) Real Estate Value Collateral Credit: Appraised value minus 25% minus existing mortgage debt Policy Cash Value Allowed For Partial Collateral: 90% of CSV run at 0.00% index credit Interest Due: BOY annually Interest Accrual: Allowed Foreign Nationals: Not allowed Minimum Required Liquid Assets Moved To Lender: None LENDER #3: Annual Rate: Prime minus 1.00% Rate Resets: Annually Origination Fee: 0.75% on total 5-year loan amount (one time for 5-year loan term) Loan Doc Fee: $5,000 (one time for 5-year loan term) Appraisal Fee & Title Fee: $2,700 (one time for 5-year loan term) Recording Fee: $250 Real Estate Value Collateral Credit: Appraised value minus 35% minus existing mortgage debt Policy Cash Value Allowed For Partial Collateral: 95% of CSV run at 0.00% index credit Interest Due: BOY annually Interest Accrual: Allowed (client can "borrow" the interest) Foreign Nationals: Not allowed Minimum Required Liquid Assets Moved To Lender: 50% of total 5-year loan facility TYPES OF REAL ESTATE ALLOWED: Property can be either residential or commercial, but cannot be an undeveloped lot or in mid-construction. In some cases, income-generating farm land will qualify, but no greater than the appraised value of the living quarters plus 10 acres of farm land. REFINANCING EXISTING/INFORCE PREMIUM FINANCED POLICIES: If this is a "refi" on an existing inforce premium financed policy, or if it an inforce non-financed policy that the client wishes to begin financing future premiums, we charge an additional origination fee that is typically 1.00% of the entire loan facilty, which can either be capitalized into the loan balance or paid to us in lump sum.