What are cash flow notes?

Answer 1

Cash flow notes are actually not that hard to understand - they are merely documents, similar promissory notes that hold one party obligated to pay another and set out the conditions and terms of payment, including but not limited to interest and term. There are a lot of different types of obligations real estate loans, court settlements, annuities, and lottery winnings.

Answer 2

Cash flow notes essentially allow an individual or company to get instant cash for their receivables. You buy the note for less than it's worth, then the debtor(s) pay you over time, so you make money.

Answer 3

Cash flow notes are legally binding documents in which a promise to pay the lender is signed by the borrower. Most of the time financial services like banks, investment firms and real estate professionals take care of this process for the borrower. They can be any sort of legal document that signifies a financial agreement between lender and borrower but the more common types care Real Estate, Structured Settlements and business loans. Cash flow notes can be sold for a lump sum of cash just like any other assets one may own.

Real Estate: These types of documents are usually reserved for commercial buildings, residential neighborhoods, mobile homes, boats and airplanes. One of the main types of a Real Estate Cash Flow Note is a Mortgage Trust deed where the borrower agrees to pay the bank for moneys taken out of their mortgage for loans. This way, if a borrower defaults on a loan (does not pay the loan on time), the bank can sell the property to collect money owed.

Structured Settlements: These are the kinds of cash flow notes you see on television with lawyers promising lump sum payments for injury or malpractice lawsuits. How this works is: the victim in a case sells annuity payments to an investor for lump sum payments. The investor will continue to receive the annuity payments, but will pay the person the lump sum.

Business Notes: These are in relation to the assets of the company. Usually prepared with the help of a financial advisor or even solely taken care of by the advisor. They include Purchase Order funding.

Purchase Orders are documents that secure the cash flow note. They are hard to obtain because they are dependant on the borrower’s credit score and carry a high risk. If the borrower’s credit score is fair or below, the chances of them obtaining this type of cash flow note will be almost non existent.