The Secondary Cash Flow Note Market

We have talked about the $350 billion private, secondary real estate note market before. But it is valuable to understand that the real estate sector is only part of the larger private cash flow industry - a 4.7 trillion dollar secondary marketplace.

There is a wide variety of privately held (and usually privately originated) debt and other cash flow instruments that are actively bought and sold. Operating somewhat like secondary markets in the banking and institutional lending arenas, the private cash flow market provides cash flow asset holders several huge advantages not often obtainable

through traditional funding pipelines – including flexibility, availability, and softer underwriting requirements.

For professional advisors representing holders of these cash flow instruments, awareness of these advantages, and a basic grasp of the possibilities, provides the opportunity to fulfill the most important service they have to offer their clients - solutions.

Seller-financed transactions have existed for decades - and potential buyers for these seller-originated cash flow debt instruments have existed right alongside. Essentially taking root in the private real estate note arena some 60 years ago, the private cash flow industry has gradually grown to encompass a wide spectrum of diversified debt instruments throughout the past few decades -as more and more participants continue to explore, and underwrite, potentially profitable financial niches.

Driven by small, independent cash flow professionals at the local level, the brokerage side of the industry has fueled the growth of investors purchasing alternative cash flows. As networking in the secondary market has grown and become somewhat more structured, a developing investor’s interest in purchasing non-debt related forms of cash flow instruments has been kindled as well. We have seen such esoteric cash flow instruments as annuity agreements, structured settlements, lottery awards and similar prize entitlements, pension benefits, royalty agreements, deferred casino winnings, deferred sports contracts, and more, all joining the parade of purchasable cash flows.

Approximately 60 identifiable debt and cash flow instruments – including the non-debt-related instruments above and others such as commercial receivables, business notes, medical receivables, automobile, marine and aviation paper, equipment leasing contracts,

time-shares, government contract payments, retail installment contracts, manufactured

housing paper, and the granddaddy of them all, real estate notes – are all actively bought and sold in private secondary markets.

The ability to tap into the liquidity that these cash flow instruments represent creates a buffet of possible options for sellers, and their advisors, to access funds quickly. In addition, being aware of the various options available in the private secondary cash flow markets can assist in both forward planning and mitigating situations where liquidity may not be a primary issue, such as avoiding excessive taxation and other form soft transactional friction, estate planning, family law issues, partnership dissolutions, portfolio building, and even asset protection under the right circumstances.

The same concepts often apply across the whole spectrum of cash flow instruments and can frequently make a huge difference in solving a problem for your clients, whether they are doctors, debtors, investors, business owners, business buyers, developers, contractors,

retirees, beneficiaries, devisees, or divorcees!