Information on a Cash Flow Business
The cash flow business consists of the buying and selling of cash flow notes. A cash flow note is a promissory note agreement between two people where the buyer is making payments to the seller for an item of value. People enter into the cash flow business intent on making a profit on each note that is purchased. You can make a profit from purchasing the note yourself or referring the note for a "finder's fee" to another individual or company that purchases cash flow notes.
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Funding
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Your goal is to offer a lump sum of cash that is less than the value of the note to the note holder in exchange for the rest of the full value of the notes payments to be directed to you, the new note holder. You can fund your note purchases with private capital, a line of credit or enter into business partnerships with others interested in purchasing cash flow notes. In a partnership arrangement, the partner would put up the funding to purchase the cash note in exchange for a portion of the rest of the monthly payments that you receive.
Types
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Cash flow notes are created in real estate sales, for vehicle purchases, to pay out lottery winnings, pay structured legal settlements, marine vessels, aircraft and more. From time to time, cash flow notes might be created for services provided, such as plumbing or paying out commission to a real estate agent within a creative financing agreement.
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Licensing
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Most states allow you to be a "note finder," where you find the note, refer it to another party for purchase and charge the purchaser a finder's fee without any special licenses or permits. However, if you choose to use the title of "note broker," your state may require you to engage in special securities licensing and permits, much like a stockbroker would. Check with your state's department of licensing for further details, as each state varies.
Contracts
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While engaging in a cash flow business, you will be sending different types of contractual agreements between yourself, the note seller, the note buyer and any escrow companies that may be involved. In any paperwork you send or sign, stay away from any legal language that implies you are anyone's "broker" or "representative," unless you are actually a qualified and certified "broker" according to your state or a licensed attorney.
Considerations
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In a cash flow business, you'll spend time and money locating note holders and cultivating relationships with those who are willing to purchase or refer the note to someone else. If the note holder is interested, you'll provide a quote for a payment price to the note holder, and at that point, you will enter into negotiations.
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References
- Photo Credit papers to be signed image by Pix by Marti from Fotolia.com
