Calling Canadian business owners: These liquidity strategies could help you achieve your personal financial goals

Business owners often reinvest most of their earnings back into their companies. While that can be a savvy strategy to fuel growth and long-term success, it can also leave owners in a bind when it comes to their personal finances, says Jonathan Hass, managing director and head of CIBC Private Banking.

A lack of ready cash flow can stand in the way of personal financial goals such as buying a house or cottage, taking advantage of an investment opportunity or saving for retirement.

“All of these goals are impacted by an inability to pull money quickly out of their company,” Mr. Hass explains. “It could be because it’s difficult to sell a piece of machinery or a building quickly. It could be because the company’s lending facility is secured against the asset. The end result is the same: their personal financial flexibility is reduced.”

Because many entrepreneurial clients have a strong, passionate belief in their company, adds Mr. Hass, they tend to have a heavy concentration of their wealth in one place – their own company. “They put all their eggs in one basket, effectively,” he says, and that situation can be risky.

But business owners can achieve their personal financial goals without disrupting their company’s operations or growth, says Mr. Hass. Strategic liquidity solutions can help clients “get access to funds to help with their lifestyle, their long-term personal goals, or whatever it is that they want to do.”

Lending products that fit

The first step with entrepreneurial clients is to learn about their business and their unique personal financial situation, Mr. Hass says. Liquidity solutions may include choosing how long to lock up funds in a GIC or investment or helping tailor credit solutions around their assets including property, insurance and investments.

Mr. Hass notes that when choosing the appropriate lending solution, CIBC Private Banking advisors look carefully at a client’s cash flow, assets and needs to find the right fit.

“The entrepreneurial mindset is very much about flexibility, the ability to move with the times,” he says. “I think that’s what CIBC, as a relationship-based bank, has recognized and made a priority when helping our clients achieve their financial goals.”

Strategic liquidity solutions also help entrepreneurs diversify their risk, Mr. Hass notes. For example, they can allow business owners to borrow in order to invest in the stock market, reducing their reliance on a single asset – their company – to achieve long-term financial goals.

These strategies can also provide a liquidity reserve or a safety net – and some peace of mind – to help business owners “navigate a downturn in their market without jeopardizing their personal needs and goals.”

Mr. Hass gives the example of one long-standing client who wanted to buy a cottage in Muskoka. He was heavily invested in his own company and needed a lending facility to meet his personal needs.

“Because we had a deep understanding of this client and his business, that comfort level allowed us to help him with a lending structure that met his liquidity needs, but also the bank’s risk appetite,” he says. “That was important – the ability to structure the bank around him, and not the other way around.”

Diversifying risk, gaining opportunity

Mr. Hass gives another example of a client who owned a substantial real estate portfolio across Canada and had recently sold a large property development.

The client wanted to invest those funds in the public markets to diversify risk away from their real estate portfolio. However, they were worried about not having cash available if another big real estate opportunity presented itself.

“We were able to create an investment structure that gave them access to the markets without any downside risk if the markets fell,” Mr. Hass says. “And we also gave them the option to borrow fully against the investment if real estate opportunities came up.”

It was a win-win for the client, he adds. “They diversified their risk, and they had the peace of mind that if there was a big opportunity, CIBC would be prepared to lend against that investment structure so that they could go ahead and do it.”

Mr. Hass says he received one of his greatest compliments from the client who told him, “You and your partners across the bank are entrepreneurial.” That comment highlights how important Canadian entrepreneurs are to CIBC.

“It resonated with me because entrepreneurs are the foundation of Canada’s success,” he says. “And we want to be there to support that success.”

This article is part of the ‘Navigating the new wealth landscape’ series, offering unique perspectives and personal stories at key wealth milestones, highlighting the benefits of partnering with CIBC Private Wealth experts.

Advertising feature produced by Globe Content Studio with CIBC. The Globe’s editorial department was not involved.