This alternative-funding industry has evolved, rather than emerged, through the natural business cycles of change and evolution. The industry has its roots in two seemingly unrelated methods of finance -- owner financing and factoring.

OWNER FINANCING

The first method of finance that led to the emergence of the industry was owner financing. In an owner-financed sale, a real estate seller accepts a promissory note as a portion of the purchase price. The note is then secured by placing a mortgage on the real estate being sold.

Homeowners and commercial real estate investors in this country have used owner financing as a method of buying property since the early 1900's. However, it wasn't until much later that it became popular.

During the high interest rate periods of the Seventies and Eighties, home buyers found it difficult to obtain affordable financing from banks. Interest rates and inflation had skyrocketed to double digits, making it almost impossible for people to sell their real estate. If a real estate seller was willing to take a down payment from the buyer and hold a mortgage note for the remaining balance, the transaction was much more feasible for the buyer--and certainly more convenient.

By the time inflation drifted back down, thousands of individuals were holding private mortgage notes. Individual investors and investment companies recognized a tremendous profit opportunity in those notes, and they began to buy them directly from sellers.

These privately held mortgage notes have turned into a commonplace investment nationwide. Today, privately held mortgage notes are even securitized and traded on Wall Street.

FACTORING

The second method of finance that impacted the development of the ndustry is factoring, also called accounts receivable purchasing. Factoring dates back thousands of years, but it has evolved into a very modern financing technique.

When a business sells a product or service to another business, it sends the second business an invoice in order to collect the money due. The first business can either wait for the invoice to be paid (eventually) or it can sell the invoice to a third party for a reduced amount. The latter transaction is called factoring. Businesses can use factoring to stimulate cash flow.

Prior to the 1980's, factoring was used primarily in the garment, textile and furniture industries and was only otherwise available to "big business". That all changed with the rise of the independent broker.

Clearly, the concept of selling an income stream has been a part of the financial services industry for "many" years. However, until the last decade, cash flow transactions were essentially limited to private mortgages and invoices.

RISE OF THE BROKER NETWORK

During the 1980's, private mortgage investors operated in their own exclusive sphere. They focused on mortgage notes, and generally did not buy other income streams. They usually targeted notes only in their local areas.

In addition, private mortgage investors typically worked directly with private mortgage note sellers. Once in a while, an investor would come across a note too large to buy and would broker it to one of the larger investment companies.

However, for the most part, transactions involved direct relationships between buyers and sellers.

Over time, more individuals discovered the income potential in brokering private mortgage notes and the broker network grew. The availability of brokers, in turn, provided more investment opportunities for investors.

It was a win-win situation for everyone. Rather than tracking down notes directly, investors could put up investment capital and rely on brokers to bring them transactions. In addition, investors could do business nationwide rather than just in their local neighborhoods.

The broker/buyer relationship created a profitable situation for everyone involved. Today, most major private mortgage investors rely on brokers to bring them transactions.

The same process occurring in the private mortgage business occurred simultaneously in the factoring industry. Traditionally, factoring had been provided by major factoring companies, often subsidiaries of large banks. It was available only to companies with annual sales in excess of $100 million a year ("big business). For smaller companies, factoring services were out of reach.

Soon, a small group of companies recognized an opportunity in providing factoring services to small and mid-size companies and emerged as factors, targeting businesses with annual sales below $100 million. But, just like private mortgage investors, their activities were focused on the geographic areas in which they functioned. And in most cases factors dealt directly with businesses, not with brokers.

Eventually, some companies began to examine factoring brokerage as a career possibility. As was the case with private mortgage brokering, training programs helped to popularize the factoring broker as an occupational category.

Today, many factoring companies which in the past dealt directly with businesses now depend exclusively -- or at least significantly -- on brokers.

The recognition that brokers specializing in private mortgages and brokers specializing in factoring were essentially doing the same thing -- brokering future payments -- laid the foundation for what we now call the cash flow industry.

When pioneering cash flow brokers started seeking out individuals and businesses with a need or desire for cash, they came across other types of income streams that offered similar opportunities for brokering. Brokers started actively seeking new income streams to broker and funding sources eagerly began to buy them.

With brokers bringing income streams to the table, and funding sources bringing capital to the table, the stage was set for an all-encompassing new industry by the early 1990's. The only thing needed to mobilize this new industry was an infrastructure that would bring the players together. That infrastructure  emerged and the industry is growing in leaps and bounds.

1. The economy is increasingly operating based on debt.

Every debt creates a stream of payments, which, in turn, creates an opportunity in this industry.

2. Income streams provide an investment alternative to investors seeking good yields on their capital.

Investors, who either fear a decline in the stock market or dislike the daily management of their investments can earn significant returns in this industry  with very little management time.

3. And last but certainly not least, the industry is gaining "visibility" in the financial services marketplace.

With increased visibility, more businesses and consumers are becoming educated about their cash flow options. And the more people learn about their options, the more people will begin looking for brokers and buyers to turn their income streams into cash!