Since the formalization of the cash flow industry, approximately 14 years ago, its growth has steadily increased. 

Cash flow brokers are entering new markets and discovering new ways to provide cash flow services to businesses and individuals.  Also, new income streams are discovered and added to the never-finished list of pieces of paper which can be sold in the cash flow industry.

Many who start out as cash flow brokers go on to become Master Brokers or funding sources mentoring other brokers just getting started in the industry and/or purchasing income streams with their own funds.

But, the most significant reasons for continued growth of this industry include:

1.  The emergence of the cash flow broker (like myself) which helps to spread the word about the availability of these funding options to businesses previously unaware of same;

2.  The economy is increasingly operating based on debt (unfortunately);

3.  Cash Flow income streams provide an investment alternative for investors seeking large yields on their money;

4.  The cash flow industry is gaining visibility in the financial services marketplace.  In fact, Wells Fargo Bank recently purchased one of the leading government contract funders in this industry.

So, let’s look at these reasons in a little more depth.

1.  Emergence (and development) of the career of cash flow specialist/consultant. 

During the 1980’s, private mortgage investors operated in their own exclusive sphere — focusing on mortgage notes and, generally, not buying other income streams. They also usually bought notes only in their own geographic areas.

Additionally, private mortgage investors typically worked directly with private mortgage note sellers. On occasion, though, an investor would come across a note too large to buy and would broker it to one of the larger investment companies.

But, generally, for the most part, transactions were between buyers and sellers directly.

Over time, the income potential in brokering private mortgage notes was realized and the broker network grew. The availability of brokers, in turn, provided more investment opportunities for investors.

It was a winning situation for everyone. Rather than tracking down notes directly, investors could put up investment capital and rely on brokers to bring them transactions. In addition, investors could do business nationwide rather than just in their local neighborhoods. Today, most major private mortgage investors rely on brokers to bring them transactions.

The same process occurring in the private mortgage business occurred simultaneously in the factoring industry.

Traditionally, factoring had been provided by major factoring companies, often subsidiaries of large banks. It was available only to companies with annual sales in excess of $100 million a year (”big business). For smaller companies, factoring services were out of reach.

Soon, a small group of companies recognized an opportunity in providing factoring services to small and mid-size companies and emerged as factors, targeting businesses with annual sales below $100 million. Their activities, too, were focused on the geographic areas in which they functioned. And in most cases factors dealt directly with businesses, not with brokers.

Eventually, some companies began to examine factoring brokerage as a career possibility. As was the case with private mortgage brokering, training programs helped to popularize the factoring broker as an occupational category.

Today, many factoring companies which in the past dealt directly with businesses now depend exclusively — or at least significantly — on brokers (as with private mortgage investors).

Brokers specializing in private mortgages and brokers specializing in factoring were essentially doing the same thing — brokering future payments — which resulted in the foundation for what we now call the cash flow industry.

When the first cash flow brokers started looking for individuals and businesses with a need or desire for cash, they came across other types of income streams that offered similar opportunities for brokering. As a result, brokers started actively seeking new income streams to broker with funding sources  ready to purchase them.  At last count, there were some 60 income streams.

2.  The economy is increasingly operating based on debt.

A USA Today article on 8/27/05 entitled, “Experts warn that Heavy Debt Threatens American Economy, “ states:

“You owe $145,000. And the bill is rising every day.

That’s how much it would cost every American man, woman and child to pay the tab for the long-term promises the U.S. government has made to creditors, retirees, veterans and the poor.

And it’s not even taking into account credit card bills, mortgages — all the debt we’ve racked up personally. Savings? The average American puts away barely $1 of every $100 earned.

It’s not a rosy picture, I know. 

But, the cash flow industry — and/or its investors – is doing its part in helping to stimulate the economy by helping small businesses to leverage their “liquid assets” rather than acquiring “debt” and thereby self-financing their own growth and expansion. 

And this is no small contribution to the economy, as we know that the total of small business is larger than big business and is the backbone of this country.

3.  Cash Flow income streams provide an investment alternative for investors seeking large yields on their money and buying future income streams is not only a very profitable form of investing but also relatively secure.

When investors buy future income streams, they do not pay face value and this equates to a high yield on their investment. 

Also, with this type of investment they know, in advance, exactly what that yield will be (provided the payments come in on time).  If they have thoroughly researched the income stream they are purchasing, they will be fully aware of whether there is the possibility of default and will have factored this into the offering price for the income stream.

Investors who either fear a decline in the stock market or dislike the daily management of their investments can earn significant returns in the cash flow industry with very little management time.

4.  The cash flow industry is gaining “visibility” in the financial services marketplace.  As noted in an earlier post, the cash flow consulting profession is growing and with the increasing number of successful cash flow professionals, comes increased visibility to the industry. 

Cash flow professionals are out spreading the word one on one, giving presentations to business groups, networking with business owners and government so that the business community is beginning to see that the cash flow industry is, indeed, an extra “Resource” for the cash-hungry new and growing businesses. 

I am regularly allowed to have booths in the Resource section of business fairs.  In one, right after Katrina, I am directly across from the SBA and right in the middle of the Resource area along with the La. Economic Development, Manufacturer’s Extension Partnership of Louisiana and other resource booths.

Many of the referrals I get come from bankers and others located in these Resource areas.  It is a win/win situation for them to have someone to refer customers to who they have not been able to help.   The ultimate objective for all in the Resource category is to help the small business survive and if that means referring a client to another Resource then that is the best thing to do.  Previously, the options available in the cash flow industry were unavailable to the little guy but that is different now and I and other cash flow consultants like me are out there spreading the word.

With increased visibility, more businesses and consumers are becoming educated about their cash flow options. And the more people learn about their options, the more people will begin looking for brokers and buyers to turn their income streams into cash!

Be Safe!  Debra

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