Anatomy Of Cash Flow Notes

As you may already know there are many different types of cash flow notes with the most common being real estate and mortgage notes, business notes, invoice factoring, accounts receivable, structured settlements etc.... The list includes more than sixty various types of notes that can be bought and sold. To recap, cash flow notes are legal and binding contracts between two or more entities. These entities could be financial institution an individual or a corporation. All of which have one common characteristic; one side pays the other a installment payment over a set period of time until the balance of the note is paid.

With real estate notes, the note itself is attached to the mortgage with the real property itself acting as collateral should the borrower default on the payments or loan. With many other types of notes, property can be used to secure the note such as boats, mobile homes, buildings land and airplanes.

Cash flow notes are also available in the business sector with the assets of the business acting as collateral. These notes include factoring and purchase order funding with factoring be the most common of business notes. Selling accounts receivables to a financial institution or investor with the Factor purchasing up to eighty percent of the notes receivable in return the business receives a loan form the funding source.

In this type of transaction, the business receives a loan for whatever the percentage is that is agreed upon between the business and the funding source. The finding source gives the business a loan and collects a transaction fee with the accounts receivable acting as collateral for the loan. Once the business receives the money owed from their clients, the business pays the funding source back. The business received the loan to use as cash flow to run the day to day operations or for other varying reasons which could include expansion of the business or even to meet payroll in lean times.

Purchase order funding is the opposite of Factoring but similar in that a business uses outstanding purchase orders as collateral to receive funding or a loan from a funding source. However these transactions are dependant on the credit worthiness of the customers of the business.

As you can see there are many different forms of notes that can be utilized for attaining cash in a lump sum depending on a varying reasons. We will learn more about this in further post here at Cash Flow Notes.