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Annuities for Retirement Planning
Advance Funding
By Julia Kagan
Updated December 19 2021
Review by Marguerita Cheng
What is Advance Funding?
Advance funding is any advance that is made to the future of a commitment or payment. The term»advanced funding» is very broad and can involve a wide range of financial situations ranging from projects or personal loans as well as future contractual payments such as royalties or annuities and also the appropriations of government.
Advance financing can come in a variety of different types. Some examples of advance funding are: payday loans, viatical settlements and lawsuit settlement advances. In general, advance funding will include an agreement to assign the contract, or a the series of due payments in the near future or the an exemption from the amount of the due payments to pay back the advance. Most often, the advance funding is discounted to reflect an imputed value of the interest.
Key Takeaways
Advance funding is an advance on a future obligation or payment.
The term»advance funding» is used broadly and can involve a wide assortment of financial scenarios ranging between personal and project loans as well as future contractual payments, such as royalties or annuities, and government appropriations.
A few examples of advances in funding include: payday loans, viatical settlements and advances in lawsuit settlements.
Advance funding can also be used to refer to the continuous process of building specific funds to finance an account for future benefits like a retirement plan.
Understanding Advance Funding
Most people are aware of the concept of lawsuit funding since commercials for these services run frequently on television stations. Someone who is the plaintiff in a lawsuit may seek out advance funding to cover their living expenses or for other reasons while they are waiting for their anticipated settlement or the damages they may be awarded. In some instances the money may be used to pay for the costs of surgeries or other medical treatments the injured or affected party may need.
Artists, writers, producers and other people involved in the production or publication of artistic or literary works are often also rewarded with a form of advance funding. In this scenario they are given an initial initial payment, which is structured as an advance to future royalties or revenue generated by future sales.
Businesses may also use vendors that provide payroll funding services. The funding of payroll can be helpful for companies with cash flow issues and need to keep their payroll processes operating smoothly and continuously. This type of funding is also used extensively by staffing firms. The payroll financing services supply this capital with a credit based on the business’ assets. Candidates must meet certain criteria and receive approval for the advance prior to receiving any cash.
The various types of advance funding structures run the gamut, so too do the terms and conditions that are associated with these financial arrangements. The eligibility requirements, interest rates and fees, and the obligations of the individual or entity that receives the advance funding can vary significantly based on the particular circumstances.
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