The high conditions of such an agreement are almost similar to this: it seems paradoxical. 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. 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. Cash flow agreements provide a convenient way to obtain funds for start-up mortgages. The right partnership between the initiator and the lender can allow an initiator to use the lender`s balance sheet to launch or increase their mortgages, while the lender can use the initiator`s existing credit platform to quickly deploy funds in different markets and asset classes. Now that EOS Contentia owns the debt, it is preparing to recover as much as possible.
Last year, for example, Van Nieuwenburg renewed a contract totalling between 9 and 11 million euros per year, with about 15,000 debts per year. “Our collection strategy is based on the data we analyzed in an anonymous form,” says Van Nieuwenburg. “This will allow us to decide which debts should be collected first and how to prioritize others.” In this context, details such as the debtor`s date of birth and anonymized information about owning a home or other property are useful. It goes without saying that EOS complies with the highest internal data protection standards and rules. “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. The terms of a cash flow agreement allow the buyer to acquire a declared amount of debt from a lender at an agreed price for the duration of the contract. Typical cash flow agreements last three to twelve months, but may be longer.
For example, a lender may agree to sell $10 million per month of debt at 15 per cent of face value for one year. The price is determined according to the amount of the buyer`s debt that will be likely to recover. The buyer benefits by ensuring a predictable debt. The lender receives unproductive debts from its books and converts the receivables owed into a constant stream of income. In addition, lenders are reducing costs by eliminating unsuccessful collective efforts. 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.