THE HISTORY OF CASH FLOW 

The cash flow industry has evolved, rather than emerged, through the natural business cycles of change and evolution. The industry has its roots in two seemingly unrelated methods of finance; Owner Financing and Factoring.

Owner Financing:

The first method of financing that led to the emergence of the cash flow industry was owner financing. In an owner-financed sale, a real estate seller accepts a promissory note as a portion of the purchase price. The note is then secured by placing a mortgage on the real estate being sold.

Factoring:

The second method of finance that impacted the development of the cash flow industry is factoring, also called accounts receivable purchasing. Factoring dates back thousands of years, but it has evolved into a very modern financing technique.

When a business sells a product or service to another business, it sends the second business an invoice in order to collect the money due. The first business can either wait for the invoice to be paid (eventually) or it can sell the invoice to a third party for a reduced amount. The latter transaction is called factoring. Businesses can use factoring to stimulate cash flow.

What Is Cash Flow?

Cash flow simply means the money that comes into and leaves a business or household. Money flows into a business in the form of revenues and out through the form of expenses. Money flows into a household in many forms. Are you receiving money from a structured settlement or lottery? Those are incoming cash flows. Do you owe money to anyone? Those are outgoing cash flows.

While owner financing can trace its roots much further back into history, it was the 1980s that really saw a new beginning in the Cash Flow Industry. Today there are more than 60 income streams that can be bought and sold. An income stream is a future series of payments. More technically, an income stream is a financial obligation or debt that one party owes to another party.

With cash flow becoming a burgeoning industry, the American Cash Flow Association® was started to provide the infrastructure to bring cash flow professionals together.

How Can You Benefit from Cash Flow?

Individuals and businesses sell income streams for three basic reasons:

• Access - It may be a need to pay debt, settle a divorce, purchase a home, take a vacation, finance a wedding, start a new business, etc. Whatever income stream you currently have that you may need cash for immediately.

• Interest or Yield - As interest or yield opportunities arise that allow you to make more money than your current investments, you may want to reallocate money from existing income streams to new better-producing ones.

• Inflation - This eats away at the future earning power of your money. You can sell your income stream to avoid the drop in real value over time.

Individuals and businesses buy income streams as a form of investing that often produce better returns than they can obtain from more traditional sources.

If you would like more information on how we can help you buy or sell income streams, or for more information, contact us today.

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