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Terms of the Cash Flow Industry

Accounts Payable:
The amount of money a company owes for goods and services it has received; any outstanding debt that a company has.

Accounts Receivable:
A collection of a company's outstanding invoices (invoices which have not yet been paid by the company's customers).

Accounts Receivable Aging Report:
A report showing how long invoices from each customer have been outstanding.

Advance Rate:
The percentage of the face amount of an income stream that a funding source will advance to a client.

Amortization:
The gradual, systematic payment of a debt, such as a mortgage or other loan, in installments of principal and interest for a definite time, so that at the end of that time, the debt will have been paid in full.

Articles of Incorporation:
A document filed with a U.S. state by the founders of a corporation. After approving the articles, the state issues a Certificate of Incorporation; the two documents together become the Charter of Incorporation.

Asset:
Anything having commercial or exchange value that is owned by a business, institution or individual. A business' assets might include its real estate, equipment inventory, intellectual assets such as copyrights or trademarks, and accounts receivable.

Bad Debt:
Any debt that is delinquent and has been written off as uncollectible.

Balance sheet:
A financial statement that shows a business' current financial condition, with assets on the left side and liabilities and net worth on the right side.

Balloon:
The balance of principal that is due and owing in its entirety at a specified point in time, but in any event, less than the time required to fully amortize the debt.

Bankruptcy:
A state of insolvency of an individual or organization. The inability to pay debts.

Beneficiary:
The person or party entitled to receive the benefits, or proceeds, of the life insurance policy upon the death of the insured person.

Bill of Lading:
A shipping document which gives instructions to the company transporting the goods.

Bill of Sale:
A document used to transfer the title of certain goods from seller to buyer.

Business-based income streams:
Cash flow instruments that are paid to a business by another business or government.

Cash flow:
The flow of cash through a business or household. In business terms, cash flow involves the flow of cash into a company in the form of revenues, and out of the company in the form of expenses.

Cash flow broker:
Professional whose primary purpose is to unite income stream sellers with funding sources. They may operate as referral sources or as the primary liaison for cash flow transactions.

Cash flow industry:
The buying, selling, and brokering of privately held debt in the secondary marketplace; the marketplace where businesses and individuals get help managing their cash flow needs.

Cash flow instrument:
Future payment or series of payments. Also called a debt instrument or income stream.

Cash flow specialist:
A cash flow professional who brokers cash flow transactions or buys cash flow instruments.

Cash flow transaction:
Occurs whenever a funding source pays cash to an individual or business in exchange for an income stream.

Certified Cash Flow Consultant:
Individual who has been certified and designated by the American Cash Flow Association whose primary purpose is to unite income stream sellers with funding sources. They may operate as referral sources or as the primary liaison for cash flow transactions.

Collateral:
Something of value (land, a home, a car, etc.) that is pledged as security to ensure the payment of a debt. Collateral is promised to a lender until a loan is repaid. If the borrower defaults, the lender has the right, by law, to seize the collateral.

Collateral-based income streams:
Cash flow instruments that are secured by collateral.

Collectibility:
Refers to the funding source's ability to collect future income stream payments once they are purchased.

Consumer-based income streams:
Cash flows in which the party that owes payments is a consumer, a private individual.

Contingency-based income streams:
Cash flows in which the recipient is not necessarily legally entitled to receive payments, or in which the amount of the payment is uncertain or contingent upon outside factors.

Corporation:
A legal entity, chartered by a U.S. state or the federal government, and separate and distinct from the persons who own it. It is regarded by the courts as an artificial person; it may own property, incur debts, sue or be sued.

Creditor:
One who is owed payments on a debt by a debtor.

Debt instrument:
Future payment or series of payments, or a debt that one party owes to another party. Also known as income streams or cash flow instruments.

Debtor:
One who owes something and makes payments to a creditor.

Due diligence:
Exhaustive research on a transaction, income stream, client, and/or payor. Due diligence may involve credit checks, appraisals, UCC searches, lien searches, or on-site visits with clients.

Equity:
The value or interest an owner has in property over and above any indebtedness owed on the property.

Escrow:
The system by which money documents, personal property, or real property is held in trust for another party by a disinterested third party until the terms and conditions of the escrow instructions are completed or terminated.

Face value:
The current principal balance on an income stream.

Factor:
A funding source that specializes in funding accounts receivable.

Factoring:
The purchase of a business' accounts receivable at a discount.

Foreclosure:
A legal proceeding in court to seize property given as security for a debt that is in default.

Funding source:
An individual investor or an investment company that buys income streams.

Government-based income streams:
Cash flows paid by a government entity, either directly or through an insurance company.

Income stream:
A future payment or series of payments, or a debt that one party owes to another party. Also known as a debt instrument or cash flow instrument.

Institutional lenders:
Savings and loan associations, local and regional banks, mortgage companies, finance companies, and commercial lenders.

Insurance-based income streams:
Cash flows stemming from insurance companies and paid to individuals or businesses.

Intangible personal property:
Something that has value but is not a tangible asset, for example, a trademark, copyright, patent, or trade secret.

Investment-to-value ratio:
A measure of how secure a creditor's position is and how likely the creditor is to recoup all of his or her money in the event of a foreclosure.

Joint venture:
A business entity established for a specific task, operation, or goal.

Lead:
A piece of information of possible use in the search for a prospective client.

Loan-to-value ratio:
A measure of how heavily mortgaged a property is and how likely the owner is to default on his or her debts.

Market value:
The price at which a ready, willing, and informed person would buy something; the price property would command in the current market.

Master Broker:
Individual who has been certified and designated by the American Cash Flow Association to work with Certified Cash Flow Consultants.

Mortgage:
A written instrument that creates a lien by pledging real property as security for a debt.

Owner financing:
A type of financing in which the seller of a tangible item accepts a promissory note as a portion of the purchase price. Also called seller financing.

Payee:
Person or business that has the right to receive a payment or series of payments and is interested in selling that income stream for cash. (Also called the seller or client.)

Payor:
The person, company, or government responsible for making payments on an income stream.

Partial:
Any part of a payment stream that is less than the full amount due.

Personal guaranty:
A contractual agreement between a funding source and a seller, whereby the seller assumes personal responsibility and liability for the obligations of the income stream.

Portfolio:
A group or package of income streams of the same type.

Privately held:
Owed to a private individual or business rather than to a bank or other financial institution.

Profit and loss statement:
A financial statement that shows a historical record of a business' income and expenses.

Promissory note:
A written promise to pay a specified amount to a specified party over a certain period of time.

Reserve:
An amount a funding source holds in its account to cover potential payment defaults. After a certain time period has passed, the funding source rebates the reserve to the client less any fees or charges for delinquency. Also called a bad debt reserve.

Secondary market:
The marketplace where individuals and businesses can sell privately held income streams to funding sources for cash.

Tail:
The payment stream and/or balloon payment of an income stream subsequent to another party's right and interest in the income stream. Usually the back half of the payment stream when another party has purchased the front half.

Tangible personal property:
Personal property other than real estate, such as cars, boats, or other assets.

Time value of money:
Concept that addresses the way the value of money changes over a period of time.

Title commitment:
A commitment on the part of the insurer, once a title search has been conducted, to provide the proposed insured with a title insurance policy upon closing.

Title insurance:
Title insurance can benefit either the payor or the payee. Should the beneficiary suffer any damages due to clouded or false title to real estate, title insurance recompenses the damaged party to the extent of the damages.

Title policy:
An insurance policy that insures a party against loss due to a defective title.

Trial balance printout:
A spreadsheet that lists all loans in a portfolio and their payment schedule. Usually required for a portfolio transaction.

Viatical:
The nature of viatical settlements is the assignment (transfer of life insurance benefits)and sale of a death benefit. In the beginning, viatical settlements were used primarily as a financial option for AIDS patients with a clearly terminal illness, who were unable to obtain the resources they need at a critical time, Eventually, victims of other terminal illnesses such as cancer and leukemia recognized the advantages of viating their life insurance policies to pay for current expenses.

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