Advanced Funding

Written by Jacey Harmon
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Advanced funding is the immediate reception of funds from a third party for future payments. For instance, a business may receive capital by using an invoice that is expected to be paid in 30 days as collateral. There are several types of income streams that businesses or individuals can utilize for advanced funding options, most notably invoices and structured settlements. This type of cash flow has several advantages for those who chose to utilize advanced funding instead of more traditional styles of cash flow sources.

Advanced Funding for Businesses

Most businesses are not cash on delivery types of businesses. Instead, they provide a service or product and then send out a bill. These bills are known as invoices, which the company expects to be paid in the future. Invoice dates can last as long as 90 days but typically last 30 days. Invoicing can often lead to fluctuating cash flows for businesses, especially if clients are not as trustworthy as first thought.

A business that utilizes invoices has the option of using advanced funding to receive immediate funds for future payments. The business sells an invoice, or future payment, to a third party, who in turn gives the business capital immediately. The strength of the clientele base will determine if a business can utilize advanced funding. Typically, a company that does business with the federal government will likely have an easier time receiving advanced funding than one who does business with individuals who have credit problems.

Advanced funding has several benefits for business owners. For starters, advanced funding is not a loan; therefore, you do not need to rely on a bank board to determine your cash flow. Receiving advanced funding is rather easy compared to traditional ways to raise capital. Venture capital firms will often give businesses cash in exchange for a share of ownership. Advanced funding is strictly the selling of future payments to ensure immediate cash flow if needed.

Advanced Funding for Individuals

Most individuals will not need to worry about trying to receive advanced funding. Instead, people who are receiving a structured settlement, lottery annuity or even a private mortgage payment are those who may need to use advanced funding. Similar to advanced funding for businesses, individuals receive immediate cash in exchange for future payments.

Structured settlements are the most likely reason why an individual will seek out advanced funding. Structured settlements are used by insurance companies to settle large claims that they pay. These settlements provide a payment stream for the claimant that can last up to 30 years in some instances. However, the claimant does not have access to the capital that is funding the payment stream. To receive immediate cash, a person may "sell" future payments to a third party.

There are several reasons why individuals consider advanced funding of settlements or other notes. Buying a house, starting a business, or funding a college education are all reasons why people take advantage of advanced funding. Inflation and rising interest rates are also major factors when deciding to pursue advanced funding of your note.

While advanced funding should not be used a merely a quick fix, it can be quite helpful. For example, by getting the money from an annuity immediately, the holder can then use the money to invest. Rather than waiting for the money to come in, advanced funding firms can be used to start growing one's finances.


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