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 Are Private Mortgage Note Sales?
For Professional Cash Flow Broker, what are considered the “cornerstone” of the business are private mortgage note sales. This is a very simple business where a mortgage note is “carried-back” by the seller of real estate rather than the purchaser finance through a bank or more traditional lending mortgage company. There are dozens of reasons for both the lending and / or the purchaser enter into this private transaction but at the end of the day, the result is the creation of private mortgage paper or what is referred to as a real estate note.
Private real estate notes typically feature higher interest rates than those offered by traditional lenders and such interest rates on private notes are used often to entice the seller to enter into the transaction due to poor credit of the buyer. Additionally, it is common for the holder (buyer) of the note to only intend to keep the paper for a limited time and move on when the buyer’s credit improves or the note can be “cashed out” and sold in the secondary market. In many instances, the note is then “brokered” to an institutional buyer at a small discount so the cashed out. The broker of the transaction earns a commission for “matching” the two together.
While private mortgage note sales tend to be the most attractive parts of this industry, and especially the residential properties, this is still a small business a with broker typically finding sales months between. Very few broker focus on note sales alone to make any kind of living and end up expanding into more financial opportunities which are referred to as the “Cash Flow Industry”.
What is Cash Flow Brokering Industry?
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
Expanding Consumer Brokered Transactions and Opportunities
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.
Business Finance & Factoring: The Elephant in the Room for Cash Flow Brokers
Although the home business of the consumer finance Mortgage Note and Cash Flow Industry are always relatively popular to entrepreneurs, they are small compared to the commercial business finance and factoring industries and once discovered by true practitioners in Cash Flow products, broker quickly integrate finance for business. From a marketing standpoint, brokers in cash flows have a difficult time locating their prospects or targets. Individuals that own what are considered cash flow obligations, though plentiful, are difficult to track down. That is not the case with business owners needing financing.
For factoring brokers and commercial finance consultants, virtually every one of the nation’s 30 plus million small business owners is a prospect for some type of business finance at some point of time. You will still to work to find the businesses when they actually need them. But whereas some one needing a cash flow consumer finance are the holder of excepting, business owners just the opposite. All business owners need businesses finance at sometime as they grow. And opposing as a private note holder who is difficult to find as a needle in the hay pile, businesses owners are as easy to find as sticking you’re head out the window. Sure, they may not to finance their business right now, but you can easily find them to talk with them.
Commercial Finance and Factoring Broker Training
The income (commissions) paid to Cash Flow Brokers is considered modest in the private note business although it does increase for most when additional products are adding to other cash flow consumer cash outs such as structured settlement, inheritance advances, etc. The cash flow business, however, pales when compared that often residual monthly income that can enjoyed from commercial business finance which can also paid to brokers for month upon month or even years on end. In fact, the two parts necessary required to note brokers to add to commercial finance to the work product mix required;
- Training: You will learn asset-based lending, SBA Loans, factoring (invoice finance), inventory finance, etc.
- Website: Expand your range of products. ( See DataMax CFB example)
Fortunately for Campus members at DataMax (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.
For those simply interest in focused real estates note primarily with partially commissions, such brokers can become “Sponsored Agents” as lead generators for IACFB professional commercial consultant. (See addition articles in this column)
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