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
receivables funding (also called factoring).
Owner Financing
The first method of financing leading to the emergence of the cash flow industry was
owner financing. In an owner-financed sale, a real estate or business seller accepts
— usually — a down payment AND a promissory note
on the balance of the purchase price. The note is secured by placing a mortgage on the real estate being sold.
Receivables Funding
The second method of finance that impacted the development of the cash flow industry is
receivables funding, also called accounts receivable purchasing or
factoring. Factoring dates back thousands of years, but 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
eventually paid 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 simulate cash flow.
It just makes sense!
Cash
TODAY
is worth more than cash in the future!
