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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.

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.

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