Reasons to Sell an
Income Stream
Individuals and businesses sell income streams (future
payment or series of payments — cash flow instruments) for three basic
reasons:
Access
People need or want access to their cash. Sometimes they have a
serious need to pay off credit cards, finance long-term medical care, or
to settle a divorce. Other times, they simply have a desire to
purchase a dream home, take a vacation, buy a new car or boat, finance a
wedding, or start a business, for example. In some cases, people
want access to their cash just for peace of mind. They no longer
want to worry about liquidity issues, collection hassles, or the
financial strength of the person who owes the debt.
Interest or Yield
People will sell their income streams — even for less than face
value — because they know that with cash in hand today, they can start
earning interest or yield. Interest or yield is what gives us the
ability to invest money this year and turn it into an even larger amount
of money next year.
Inflation
Inflation eats away at the future value or "buying power" of
money. You can buy more with a dollar today than you will be able
to five, ten, or twenty years from now. People sell their income
streams because they realize that over time, the payments they receive
will drop in real value. Small payments over a long period of time
have less buying power. A Lump Sum of cash today can provide you
with financial stability and flexibility. Purchasing Power!
The Bottom Line? . . . .
Cash
today is worth more than cash tomorrow!
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