„Fast-flow transactions allow companies to sell unpaid invoices to a collection company at specified intervals and at an agreed price,“ explains Yves Van Nieuwenburg, sales manager at EOS Contentia in Belgium. „This is a potential win-win situation. Our partner sells its debts at regular intervals and receives money for debts that have not yet been settled until the end of their internal collection process. And for EOS too, the transaction is profitable: „Because we carefully calculate any recovery costs. Not surprisingly, representations will be strongly promoted as part of a cash flow agreement, particularly those for underlying loans. Accelerated-flow financiers may require a series of detailed and comprehensive granular presentations, which, in addition to and as an extension of the representations frequently found in special financing transactions, take into account the creation process (including possible broker introductions), as well as the status, nature and nature of the underlying borrowers. Since a lender generally funds 100% of loans that meet the eligibility criteria (subject to the rights to require the ceding company to buy back the initiator), cash flow agreements tend to be more appropriate and, as a result, there is less „market vision“ compared to other financing products available to borrowers in this sector. Among the provisions generally negotiated is: a cash flow agreement is an agreement in which a lender offers to buy credits from all or part of the sponsor. Investors receive weekly interest payments based on the performance of the underlying loans. Under the forward flow agreement, the capital manager will remain invested in underlying credits until cash flow is due. Defaults are simply a business matter. Almost all companies have receivables that are not paid from time to time, but permanently, depending on sectors and industries. Fast-flow transactions can solve this problem. One of the most important decisions for any new entrant to the mortgage market is the financing of the crucial early phase of its creation.
In the absence of the assistance of entrenched investors, able to provide equity to obtain and serve a large volume of mortgages, new initiators have traditionally opted for inventory financing as their preferred financing method. However, a notable recent trend has been the emergence of cash flow agreements as a viable alternative. This note examines some of the characteristics of forward financing structures and inventory financing structures from the perspective of a new initiator and examines why the forward flow is gaining traction. It`s a paradox. One company constantly has outstanding debts, another company buys them over and over again and it`s a good deal for both? It`s true. But that`s exactly how forward flow transactions work. We explain the challenge of the business model. The high conditions of an agreement like this resemble this: – Principal invested in a cash flow will continue to work for the duration of the agreement, so that investors can reduce their risk of reinvestment compared to the purchase of individual loans.