News and Tips on structured settlement transfers.

Understanding the Discount Rate

When soliciting bids for your structured settlement, you have probably seen that the amounts being offered as lump-sum purchases for your settlement are substantially less than the total of all the payments that are coming to you. If you’re wondering the reason for the difference, it’s the discount rate.

One way of describing the discount rate is to think of it as an interest rate in reverse. When you borrow money, the lender is charging you interest – an amount over and above the initial loan that you are paying them to compensate for your use of their money. Similarly, the discount rate is the amount that a structured settlement buyer is charging you to give you an advance on your settlement.

While this may seem unfair, think of it from the perspective of the buyer. In order to buy your structured settlement, the buyer has had to amass the lump sum of cash that he will be giving you; if he doesn’t have this cash on hand, he’s had to borrow it from somewhere else. Even if he does have the cash on hand, he is losing interest earnings on that money by giving it to you.

On top of this are the buyer’s operating costs. He probably has an office, with rent and staff that don’t work free. He probably has a few lawyers of his own – and they aren’t free, either. And, of course, he’s not in business to help you – he wants to make a profit.

So what kind of discount rate can you expect to give up when you sell? Well, there is no hard-and-fast rule. Discount rates can often be in the double digits. In 2010 a New York judge questioned one structured settlement agreement that had a discount rate of approximately 20%. You’ll probably have to appear in court to finalize any sale of a structured settlement, but don’t count on the judicial system to determine if a discount rate is reasonable. Once you see the offers you get – and you should always shop your note around to several buyers – you can use online calculators to determine the discount rate you’re being charged. Additionally, when you seek out legal and financial advice for your prospective sale, your advisors should be able to tell you if the discount rate you’re being charged is comparable to other deals they’ve seen recently. If it just seems outrageous – especially if they’re charging you other fees on top of it – it may be time to step back and reconsider whether selling your settlement is your best option.

If you need help selling your structured settlement, annuity or lottery payments,
contact us today. We are here to answer your questions and help you obtain the
highest possible price for your payments.

Three Killer Reasons to Buy Structured Settlements

Frustrated with the low interest rates available on conventional investments? Looking for a different way to make money? Interested in a better way to maximize returns at the lowest possible risk?

If so, consider buying structured settlements.

A structured settlement occurs when a plaintiff in a personal injury lawsuit (usually) is awarded a large sum of money for their injuries. Because the defendant usually can’t pony up that kind of cash in a hurry, he buys an annuity from an insurance company. This allows the plaintiff to get a certain number of payments of a fixed amount over a period of time.

But, sometimes, the annuitant needs a lump sum of cash up front, usually for medical expenses or some other financial emergency. When this happens, s/he may sell some or all of the payments to which she has been given the annuity. This is called a structured settlement factoring transaction, and here’s where you come in. Why buy such a thing?

Return on Investment. Structured settlement annuitants who are looking to sell need cash fast, and so are willing to accept a much smaller lump sum than the combined amount of all their payments. The discount rate – which you use to determine what you will pay the seller in cash – can get up to the double digits. This sets you up for an enormous rate of return over time, provided you have the ability to wait for the payments.

Steady Payments. Since the annuity payments are coming from an insurance company, the risk that you won’t get the payments you have bought is pretty low. As long as the insurer stays in business, you’re set.

Recessionary Economy. In the current economy, people are facing all sorts of financial difficulties, and these are what motivate sellers of structured settlements. Loss of a job, spouse’s loss of job, impending foreclosure, a need to go back to school, or medical expenses for the annuitant or a family member, are all reasons that an annuitant might be looking to sell his structured settlement at a deep discount.

What Buyers Should Know. This isn’t a risk-free investment for you, either. You’ll need cash to make the payment. Since this is a highly regulated transaction – nearly every state requires prospective sellers to get financial advice, and to wait out a “cooling off” period – you’ll need legal help, and there’s always the risk the seller could change his mind, or that the court might balk, before the deal is finalized. But even one successful deal might make it all worth the trouble.

Uncategorized
04
Jan

Structured Settlements and Your Finances

If you have won a settlement as part of a personal injury lawsuit, you may find that it will be paid to you in installments rather than all at once; this is, of course, a structured settlement. The defendant will purchase an annuity, usually from an insurance company, which will make payments to you, usually on a monthly basis.

There are a few reasons why your settlement may be annuitized in this way. Of course, the defendant probably doesn’t have the full amount of your settlement on hand, so the annuity is the only way he can afford to pay it.

For the plaintiff, an annuity is designed to provide for his living and medical expenses for a period of time. This can be particularly important if the personal injury that gave rise to the lawsuit has left the plaintiff unable to work and earn a living. An annuity is also designed to protect the plaintiff from himself; that is, to keep him from spending down the entire settlement too quickly. If the annuity is to settle a lawsuit based on a personal injury, the annuity payments are tax-free.

Still, an annuitant may want or need to get a lump sum of cash up front. Some or all of the annuity payment stream can be sold to interested buyers in what is legally referred to as a structured settlement factoring transaction. If you are considering selling your annuity, you should make sure you have a compelling reason to do so, since you will receive much less in a lump sum than you would have received over the life of the annuity. The sale will have to be court approved, and the judge will want to know the reason you’re cashing out. Basically, it should be a financial emergency, repayment of debt, or some other pressing need that the sale of the annuity will resolve in full.

Selling your structured settlement in order to get a lump sum of cash to place in some other investment is likely not a good idea. Structured settlement buyers use what’s called a discount rate to determine how much they will pay you for your annuity. This discount rate can often be in the double digits, so unless you have an alternative investment that will beat that discount rate, you are better off staying with your original annuity. If you have found an investment that will beat that rate of return, it’s probably risky. Besides, there are often fees associated with the sale of your settlement, and that also eats into the amount you will receive.

Annuities / Factoring Education / Notes / Sellers / Structured Settlements
02
Jan

Selling Your Structured Settlement – The Process

The details of the various steps of a structured settlement factoring transaction can vary a little by state, but generally the process looks like this.

First, shop around. Decide how many payments of your settlement you want to sell and get offers. Always shop your annuities to several companies. A site like QMAP makes this process very easy. It’s important not to disclose details of competing offers to the different companies you’re comparing. Also, check the reputability of the companies you’re considering. The Better Business Bureau is a great resource; if you see lots of complaints against a prospective company, reconsider.

Once you’ve signaled your acceptance of an offer, you will have to prove that the payments you’re selling are legitimate by providing a copy of your annuity policy or other supporting documents. The seller will then send you documents that spell out the terms of their purchase for you to sign. At this point, if you haven’t already done so, it is strongly recommended that you seek legal and financial advice regarding this transaction; some states even require it. Even after you accept the offer and sign all the documents, your state will likely require you to wait out a “cooling off” period during which you can change your mind.

At this point, the transaction will have to be approved by a court. Depending on your state, you may have to appear before a judge. The judge will look at the terms of the deal, especially the discount rate used to reduce the future payments you’re selling to the lump sum you will receive. Also be prepared to substantiate the reason for selling your structured settlement, such as medical or educational expenses, legal expenses, or repayment of debt.

The court-approved transaction will be forwarded to the insurance company to document the sale of your settlement. The buyer will then advance your funds to you.

The entire process will take somewhere around 45 to 60 days, depending on the state where you live. When checking the reputability of prospective buyers, you may find complaints that the buyer took longer to process the transaction than promised, and beware that some unscrupulous companies will drag their feet. Also, at each step of the process, re-check the terms of the agreement to ensure that the seller has not changed the amount of the payment or added in any fees – this is another common complaint against buyers.

Remember that selling your settlement is a very serious decision and shouldn’t be rushed. Give serious consideration to whether this is your best option.

Uncategorized
01
Jan

Finding the Right Buyer for Your Structured Settlement

So, you’ve decided to sell your structured settlement, or lottery settlement, or some other installment payment that’s coming to you. You want to get the best deal, but how do you know who’s the best buyer?

Shop Around. Of course, always shop your note to several buyers. A website like QMAP makes this process easy by allowing you to publish the details of your settlement, and let the offers come in. This should be your mandatory first step.

Reputation. Once you have some offers in hand, it’s easy to see which one will get you the most cash. But you also need to consider the source. Is the prospective seller reputable? Can they be counted on to deliver what they’ve promised? If you look around the Internet for news articles, you will find plenty of stories of buyers who were burned in selling their structured settlements. To avoid being another dissatisfied customer, check the reputability of your prospective seller.

Check the Internet. A quick Internet search for the company’s name is not conclusive research, but it will give you an idea of complaints that have surfaced about the prospective buyer, and about his history. And don’t be sold just on a big name with lots of clients; some of the less prominent buyers might be start-ups who are genuine but don’t have the impressive resume.

Better Business Bureau. Go further in your search by checking the Better Business Bureau. It’s easy to trash a company online, but filing a complaint with the BBB takes a little more effort and should carry more weight in your evaluation. Common complaints against buyers of structured settlements are that they changed the terms of the agreement midstream; charged exorbitant or hidden fees; or that they took longer to close the deal than promised.

Details of the Deal. Once you’ve evaluated your offers and the prospective buyers, and chosen the one you’d like to work with, check the fine print of the deal you’re offered. You should always seek legal and financial advice in selling a structured settlement to make sure the deal is right for you. Look at the discount rate – the rate the buyers use to peel back your total settlement to the amount they are planning to pay you for it – to make sure it’s in line with other sales (your lawyer or financial advisor should be able to tell you how it stacks up). Look closely for any fees – court fees, legal fees, processing fees, or anything else, and be aware that it will be coming out of your settlement.

Annuities / Marketplace / Notes / Structured Settlements / Tips
31
Dec

Selling Your Structured Settlement Online Now

You’ve got some kind of a structured settlement – maybe from a lawsuit, maybe from winning the lottery, maybe a note secured by a mortgage or a business.

But it’s just sitting there. Your next payment could be months away. You need cash now. What can you do?

Thanks to sites like QMAP, you have access to a fast, easy online marketplace where you can shop your note or settlement to willing buyers to come up with the best deal for you. So – what’s next?

Put out the details of your settlement arrangement, and what you want to sell. You can sell all of the future payments if you want, or sell only a few of them. It really depends on how much cash you need. Using a site like QMAP, you can list the details and get offers from interested buyers.

Shop Around. Like the song says, don’t be sold on the first offer. Every buyer of structured settlements is different. There are some firms who do a high volume of business and have well-known names in the business. Others might be small or start-up businesses looking for a return on your structured settlement. Some firms may start out with a low offer, only to come back with a higher one when you say no. Remember that when you sell a structured settlement, you will receive less in a lump sum than you would have received altogether over time. This is how companies make money – and how you get the cash you need right now.

Fees. Buyers of structured settlements are in the business of making money on the difference between your total payments and the cash they pay you now. But the buyers incur costs in doing so; they have overhead (office staff, communications expenses), legal fees, court fees, and the interest cost of getting access to the cash they will use to buy your note. As a result, the deal you’re offered may include varying amounts of fees. Each offer should be up front about the fees that will come out of your lump-sum settlement.

What’s the Money For? Annuities, particularly those entered into as part of a personal-injury settlement, are intended to support the annuitant for a period of time. The buyer of your settlement is looking to turn a profit, however, and is not concerned with why you want the money or how you plan to spend it, or how the loss of this annuity will affect your personal finances. However, the court may have to review and approve the sale of your settlement, and will want a compelling reason for the sale of your settlement. Don’t be vague. If you want to sell, you should have a good reason to do so, such as a compelling financial emergency, college tuition, or a solid business or investment opportunity. Be prepared to substantiate your reasoning.

Annuities / Sellers / Structured Settlements
30
Dec

Why Companies Purchase Structured Settlements

If you’ve got a structured settlement as the result of a lawsuit, or winning the lottery, you may be visiting a site like QMAP to consider the possibility of selling it for up-front quick cash. But what motivates the companies that buy the settlements?

Investment Return. The most compelling reason for a company or investor to get into the structured settlement purchasing business is the potential for huge returns on their investment. Consider that these companies buy all, or part, of the stream of payments you have been guaranteed for just pennies on the dollar. The goal for the purchaser, of course, is to get that lump-sum payment as low as the buyer will accept. The result can be returns substantially greater than any investment on the market.

Security. Once the structured settlement sale has been agreed to and approved, the buyer is virtually assured to get the stream of payments he has purchased. Most structured settlement annuities that result from lawsuits have been set up or purchased through insurance companies, so as long as the insurer is creditworthy and likely to stay in business, there is virtually no risk to the purchaser that he won’t get his cash flow later. Installment payments for lotteries, paid by the government, are even more secure.

Fees. In addition to the return on investment that the purchaser will receive, they can also cover their upfront costs by charging a fee as part of the structured settlement sales transaction.

Getting into the Business. Of course, the purchaser of the structured settlement has a pretty full plate. To get into the business of purchasing structured settlements, the company must have quick access to cash. If the settlement purchaser does not have the cash on hand, he must somehow secure it elsewhere – this means a cash advance on which he will have to pay interest. He’ll likely also incur legal fees getting help with the purchase contract, navigating the court system, etc. There will be overhead, too – office staff, communication costs, and so on. All of this is a substantial up-front investment for a new company in the structured settlement business.

The sale of a structured settlement will have to be approved by the court. Because the court and the seller will want to check the structured settlement buyer’s reputation, it may be difficult for a start-up to compete with bigger, established names. Also, if there has already been substantial work put into finding the seller, figuring up an offering price, and drafting the sales contract, only to have the court refuse to approve the sale, those costs are sunk. Still, even one successful purchase of a structured settlement can cover of that and make an immediate profit.

Uncategorized
29
Dec

Should You Cash Out Your Structured Settlement?

When you settled your lawsuit, won the lottery, or entered into some other structured transaction, it probably seemed like your best option at the time. But now that some time has passed, and life has happened to you, you might be re-thinking the whole thing. Should you sell what you have for quick cash?

First, understand that if you sell your structured settlement, you will receive much less in a lump-sum than you would have collected over time. Still, there may be very good reasons to take your payout.

Expenses. A financial emergency may be pressing on you. You may be facing unemployment, medical bills, foreclosure, or legal troubles that have become unbearable. If the cash you’ll get from selling your structured settlement is enough to cover and take care of the emergency, then cashing out might be a good idea. Paying off a crushing debt load might be a good reason to cash out too – even though you’ll get less in a lump sum than you would have gotten over time, if you’re facing double-digit credit card interest rates, wiping out the balance could be well worth it. Just don’t get yourself back into debt again.

Education. If you or a family member are going (or going back) to school, cash from your settlement can help cover tuition and fees. But before you cash out for this reason, check other sources of financing. Scholarships or government grants are ideal. If that’s not available, check into student loans. If the interest rate on a student loan is lower than the effective interest rate you’re earning on your structured settlement, you’re better off with the loan.

Going Into Business. Maybe you always wanted to start a business, or you may have stumbled upon an irresistible opportunity. Your settlement may provide the cash you need to pounce on that opportunity quick. Before you sell, consider other possibilities for financing the venture, such as a bank loan or a business partner. And check out your new opportunity thoroughly to make sure it isn’t a scam and that the profit potential is there.

Know Thyself. One more thing to consider: what not having the annuity will do to your future finances. Structured settlements are intended to lock in future income. If you’ve won the lottery, you likely don’t want to work the rest of your life. And if you have a settlement as a result of a personal-injury lawsuit, you may not be able to work. What will you do if that income is no longer there? If you are a spendthrift who has trouble managing money, who is prone to impulse buys of toys and trips, think long and hard before cashing in that settlement.

Uncategorized
28
Dec

Analyzing Business Financials (part 4):

This is the last part of a series of posts discussing what potential buyers review when considering a business for purchase. This will help potential buyers, as well as potential sellers looking to spruce up their product.

Prior Year Financials. If possible, get financials from the business going back five years or even longer, if available. Check all of the ratios for trends. Look at all the financial ratios discussed in the prior posts to those throughout the industry to see how this particular company is performing. Are things getting better, or worse?

Sales Detail. If possible, find out who’s buying from this business. Are there a lot of first-time buyers? A number of regular buyers? Or are there only a few buyers? Large retailers have been known to pick small suppliers and become their number-one customers, only to later squeeze those retailers for smaller margins, effectively putting those vendors are out of business. If this company has all its eggs in one basket, walk away.

Accounts Payable. Who are the vendors and suppliers this business is using? What are their payment terms? How do those terms compare with the accounts receivable terms, and how well clients are paying their bills? Even if a business is profitable, cash flow is important, so if money is going out faster than coming in, walk away.

Cost Detail. If possible, obtain detail of the specific costs the firm incurs to do business. How are they spending their money? What are they paying their employees? Are the employees’ salaries competitive with similar businesses, or are they overpaying (or underpaying) their staff? What are they spending on sales and advertising? Again, is this competitive in the industry? Consider the expenditure detail and what you would change upon purchasing the business. Are your planned changes something the business – and its clients – would accept and survive?

Location, Location, Location. Just like any good piece of real estate, a business is dependent on the local area for its value. How is the local area doing financially? Are people moving in, or are they leaving? Of course, this isn’t important for all businesses; for example, if most sales are made online and shipped far from the home office, location isn’t quite as important.

Business Valuation. You should seek the help of a professional to perform these evaluations, especially if you are new or unfamiliar to the industry this business is in. Consider enlisting a business broker, someone who makes his living buying and selling businesses (much like real estate). Alternatively, consider a CPA who is certified in business valuation.

Why is this business selling? This is perhaps the most important question to ask of any business that’s up for sale. Why are they looking to sell? Is the owner simply looking to retire, or are they seeing negative trends that have told them it’s time to cash out and run?

Uncategorized
27
Dec

Analyzing Business Financials (part 3):

In addition to financial statement ratios, here are some things a potential business buyers will consider. This is a resource if you’re looking to buy – or if you’re looking to spruce up a business (or business note) you’d like to sell.

Financial Details. If at all possible, examine the detail underlying transactions for the business. Many entrepreneurs use a business as a tax write-off for items they buy and use personally. This can affect the numbers you’re reviewing in the financials, so be on the lookout for these types of transactions.

Inventory. What do the inventories look like? If you are able to examine the inventories in person, consider whether they look brand new, or whether they have an inch of dust resting on them, implying that they’re not selling. Trust your gut – do you see customers actually wanting to buy this stuff? You might consider taking a business valuation specialist, such as a business broker, with you for this inspection.

Furniture, Fixtures, and Equipment. Much like the inventory, what does it look like? Is it new, or old and broken down? Can you use it? Will it attract potential buyers to your business? Can you use it, or will you have to modify what you have (i.e. pay more money) to make it work? Is it paid in full, or are there still leases in effect that you’ll have to pay?

Liabilities. What does the business owe? Are there outstanding loans or leases? Mortgages? What about contracts with suppliers or employees? What about outstanding liens or other liabilities? Get a good idea of what the business owes – and what you’ll have to pay. A lawyer can be particularly helpful in finding this out.

Taxes. Does the business owe taxes to the IRS or to the state? Are there back tax bills that need to be settled?

Accounts Payable and Accounts Receivable Detail. Again, if possible, take a hard look at the underlying vendors or clients that make up these numbers. Get a solid understanding of the creditworthiness of the business’ clients. How likely are you are to get the cash you’re owed? How much, and how soon, will you have to pay your suppliers? A profitable business means nothing if there is no cash flow, so if Accounts Receivable aren’t converting quickly to cash, this is a red flag. Are those A/R sales legitimate, or could they be fraud?

Returns. Pay close attention to any returns figures listed on the financial statements. Again, this is a favorite place to hide fraudulent “sales” that aren’t turned into cash. Even if there’s no fraud, a high rate of returns does not bode well for the profitability of this business.

Industry. Consider the industry this business is in. Is it a growing industry with lots of potential, or is it stagnating? Is this an emerging line of business that is untested?

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News and Tips on structured settlement transfers.

Let Companies Compete to Buy your Structured Settlement!

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