Cash flow notes are debt instruments. When there is a debt instrument, there are two parties who are mainly involved- the debtor and the creditor. The debtor owes a money or a certain value to the creditor. The transaction may come from a sale of property, borrowing of funds, or from any other known transaction.
Normally, as how debts and credits go in the past, the debtor promises to pay the amount he owed to the creditor at a specified term or time. The span of time between the promise and the day of payment can be either short-term or long-term. But whether it is for short-term or long-term, the creditor has to wait until day of payment arrives. Based on the agreement, payment from the debtor to the creditor can be in installment basis as in periodic payments or can be once in a time both with an increment of interest.
Now, a slight deviation to that ordinary course of transaction has occurred. Because some creditors can not wait for the day of payment or they dislike the terms of payments, they prefer to sell the notes in their hands and transfer it to another hands. Thereby, they receive the payment in advance and the buyer of the note becomes the creditor. Of course, the price at which the buyer bought the cash flow notes is discounted.
Buying cash flow notes has become a good investment opportunity to grow earnings. If the buyer will not decide to keep the note for himself and wait until the note is due, he can choose to sell it to another buyer. Buying and selling of cash flow notes has become a growing and widespread business among brokers and investors nowadays.
If you want to invest in buying and selling cash flow notes, you need to exert a good amount of efforts like when you sell annuity loans. It is best that you take the job of a broker first before investing your money in buying notes and reselling them. If you have gained a good experience already, you can start with buying the notes by your own money.