Today, most factoring brokers enter the industry because they managed to discover this unique opportunity and industry by surfing the web or they were pointed to it by some obscure article on a “Best Home-Based Business Opportunities” blog. That was not, however, always the case. At one time, most factoring consultants were once associated with an entirely different industry…“The Cash Flow Industry”.
What is Cash Flow Brokering?
Cash Flow Brokering refers to a well practiced, home-based business opportunity that revolves around the purchase, sale and investment in private notes and other types of private debt obligations. The cornerstone of the industry has always been privately held, first and second position residential mortgage notes generated from owner financed real estate transactions. Over the years, however, product areas associated with the industry has grown to include:
- BUSINESS NOTES: Carry-back paper created when a small business is sold and the seller finances all or a portion of the sale
- STRUCTURED SETTLEMENTS: Annuities awarded to beneficiaries involved in legal cases involving wrongful death, product liability, personal injury etc.
- GAMING AWARD ANNUITIES: Annuities earned by lucky winners of state lotteries and Vegas-style gaming awards
- PORTFOLIO PAPER: Books of performing consumer paper such as “Buy Here-Pay Here” auto paper
- INHERITANCE ADVANCE: An advance of cash paid to a beneficiary based upon a pending inheritance tied up in the probate system
- LEGAL SETTLEMENT ADVANCE: An advance of cash paid to a claimant based upon the likely probability of a cash award being granted in a personal injury lawsuit
Brokered Transactions and Opportunity
Virtually any debt obligation can be purchased and usually at some discount to it’s face value with the purchase price being based upon that obligations “cash flow” or anticipated cash flow. Since all such obligations can be purchased and sold (just like an invoice in factoring), there exists a “middleman opportunity” where an individual can act as a “finder” and introduce those individuals in need of immediate cash to those institutional funders that purchase that particular type of obligation. For their referral, the finder is awarded a finders fee or commission. The Cash Flow Industry is all about operating as the middleman in these discount transactions.
Opportunities for Factoring Brokers
The Cash Flow Industry is relatively small compared to the factoring and commercial finance industries but from a “brokering opportunity” standpoint, operates in a similar fashion. Cash Flow Brokers are true finders and never become actually involved in contracting or the legal ins and outs of purchasing an obligation and, in fact, are often legally prohibited from doing so. From a marketing standpoint, brokers in cash flows have a more difficult time locating their prospects or targets. Individuals that own what are considered cash flow obligations, though plentiful, are difficult to track down, whereas for factoring brokers and commercial finance consultants, virtually every one of the nation’s 29 million small business owners is a prospect for some type of business finance. Still, factoring brokers and commercial finance consultants should familiarize themselves with these “cash flow industry opportunities” as they can appear from anywhere and at anytime. It is not entirely unusual to find a business owner you are prospecting for factoring to have a business note from the sale of a previous business or even a private mortgage note from the sale of a residence. Although your business and marketing efforts will be directed towards the more plentiful targets found in factoring and commercial finance consulting, don’t miss any easy cash flow industry opportunity if it falls in your lap. Spend some time learning a bit about cash flows and that time honored industry.
Cash Flow Broker Training
Cash Flow Broker training is available from a host of companies that are primarily institutional mortgage note buying and is relatively inexpensive. Fortunately for Campus members, IACFB has a robust training area dedicated to this unique niche which can be accessed by all Campus IACFB Members and additionally can provide special websites (called SuperSites) that not only feature all the favorite product areas of Commercial Finance Consultants (i.e. factoring, asset-based lending, SBA lending, and export trade finance) but additionally provide information for the favorite product areas of Cash Flow brokers as well.
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