What are advisors’ frequently asked questions about CSV lending products?

1. How can the different products be categorized?

They generally fall into two buckets: back-end lending and front-end lending. With back-end lending, the CSV is already established in the contract. These facilities include an Access Line of Credit (ALOC), an Access Line of Credit Plus, the Insured Retirement Program (IRP) and CSV Lines. They’re all revolving in nature, with access through ATMs, online banking and cheques.

The second bucket is front-end lending, whereby the contract is new or only a few years old. This facility is an Immediate Financing Arrangement (IFA), which is done via annual advances once the premium is paid.

2. What does the client need to have in place in order to qualify?

For front-end products, the contract has to be established or about to be established. The client has to provide evidence of debt servicing.

For back-end products, ALOC and CSV Lines, clients need to have the required CSV amounts and provide evidence of debt servicing. IRP clients need to have the required CSV and a satisfactory credit history.

In both cases, clients must be approved by Manulife Bank’s credit department.

3. What are the minimum and maximum loans the bank will consider?

The minimum lines of credit are $25,000 for an IRP, $25,000 for an ALOC and $100,001 for an ALOC Plus. There are no maximums except for the ALOC program at $99,999. For the IFA, the minimum is $30,000 in advances per year. For the CSV line, the approved line of credit limit should be no less than $250,000. All amounts are in Canadian dollars.

4. What is the process for setting up the various products?

Contact your local Manulife Business Development Manager. They’ll assist with the transaction for IRPs and ALOCs, or will bring in a Business and Insurance Lending Specialist for more complex cases of those products and for CSV lines and IFAs.

5. Can insurance lending products be moved from another financial institution to Manulife Bank?

Absolutely, and that’s strongly encouraged!

6. Who can own various products?

All our products except the ALOC can be owned personally or corporately.

7. Can loan arrangements be transferred between personal and corporate?

Yes, but that would involve a new approval. We recommend consulting a tax professional before doing so as there could be tax implications with a restructure of the lending.

8. What types of collateral security are acceptable?

We can accept whole life and universal life contracts from 10 approved life insurance carriers, subject to product minimums.

9. What are the possible tax advantages of CSV lending?

Since no withdrawal is being made from the life insurance contract, taxes aren’t triggered. Clients may be able to deduct interest, so long as proceeds of the loan are used for investment purposes. It’s also possible to establish contracts that create a capital dividend account. Individuals should consult their own tax advisors with respect to their specific situation.

10. Why should I recommend CSV lending?

These products facilitate access to credit, using collateral your client may not have considered. Additionally, IRP and IFA strategies can often help clients ensure they have the insurance protection they need, while maintaining cash flow for personal or corporate requirements.

Most important, you will be providing added value to your clients by proposing a flexible and convenient solution to their funding needs.

Learn more about the benefits of Manulife Bank’s insurance lending solutions.