The state of the discounted cash flow business, in a word, is GREAT. There are several reasons for this: the state of the economy, the diversity of available cash flows, the amounts of cash flows available and people’s need for cash.
To understand the state of the cash flow business, it is important for you to understand the state of the economy. Most of the population (herein referred to as “Main Street”) would agree that we are emerging from very troubled financial times. From a selfish standpoint, this has not been a bad thing for those of us in the cash flow business. In fact, a troubled economy is a very good thing for cash flow practitioners.
There are so many complex variables making up the economy that NOBODY knows what is going to happen. More importantly, all of these variables are out of your control. This brings me to the point I would really like to address: You must focus on only what you can control. Controlling your own financial future is up to you. Financially speaking, it is absolutely essential to be in control of your own economic well-being. The great thing about being involved in the cash flow business is that no matter what happens to the economy in the future, you will remain in control of your own financial life.
We in the cash flow business are fortunate to be in one of the few healthy growth businesses that exist today. We provide large lump sums of cash to folks who need cash. We are providing this service at a time in our country’s financial history when many are in desperate need of money. This allows you to stay out of personal recession by earning fees and gets the cash flow seller out of their personal recession by receiving cash. This amounts to a win/win situation.
In the cash flow industry, there are institutional funders/buyers/investors. These funders have virtually unlimited funds with which to purchase cash flows. Because of the availability of unlimited funds from institutional funders, you can facilitate transactions between funders and sellers of cash flows without using any of your own capital.
There are two types of cash flows that institutional funders will purchase: real estate backed cash flows (mortgages, trust deeds, etc.) and NON-real estate backed cash flows (lottery/casino winnings, delinquent debt, lawsuit settlements, etc).
Most people starting out in the cash flow business focus on real estate cash flows, which are referred to as discounted mortgages. Depending on whose figures you use, there are now up to $900 billion worth of available real estate notes (and that figure is growing exponentially). That is a very healthy number. There are, by all best guesstimates, trillions of dollars worth of NON-real estate backed cash flows. This is an even healthier number.
To understand the present state of the cash flow business, it is important to understand what has transpired in the past. Let’s look at the evolution of the cash flow business. Only 15 years ago (plus or minus), there were NO institutional funders. In the last 10-15 years institutional funders (Wall Street types) discovered our little niche business. This allowed you (Main Street) to be able to deal in a multi-million dollar business using “Wall Street” money. When the ‘Wall Street’ types discovered our little business (10-15 years ago), they would only buy real estate notes. This brings us to today. Because of their desire for higher yields, they increased their buying parameters to include NON-real estate cash flows. That meant our potential market (inventory stock) jumped from billions (not bad) to trillions (much better).
Imagine, trillions of dollars worth of available inventory. Inventory that you do not stock, you do not own and you never have to touch. It is our opinion that the future and profitability of the cash flow business will be in non-real estate notes. The simple reason is because there is so much available – trillions of dollars worth.
With regard to the state of the cash flow business: (A) you are in a business that provides people cash at a time in our country’s history that many are desperate for cash, (B) the funds used to purchase these cash flows come from an institutional investor i.e., no money out of your pocket, (C) the amount of product/inventory is enormous and likely to be available for many years to come.
What is the state of the cash flow business? You tell me.