What are forward flow agreements in legal funding?
A forward flow agreement is a commitment by a buyer to purchase the advances, liens or receivables an originator creates in the future, on terms agreed before the first purchase. The originator gets capacity that does not run out as volume grows. The buyer gets a steady supply of assets that meet agreed criteria.
How it works. The parties agree the eligibility criteria, the pricing method and the reporting. Each period the originator offers assets that meet the criteria, and the buyer purchases them under the agreed terms.
Why originators use it. Origination is capital-hungry. Selling assets as they are created recycles capital into new origination and removes the ceiling that a balance sheet puts on volume.
What the buyer needs. A record of how the originator’s assets have performed, so the pricing method rests on evidence, and reporting that lets the buyer see each tranche as it arrives.
What can vary. Pricing can be fixed or tied to performance. The buyer can take every eligible asset or a share. The originator can keep servicing. Each of these is set in writing before the first tranche.
Criterica Capital prepares requests for forward-flow take-out to originators of pre-settlement advances and liens. A written read of the originator’s book comes first.
Common questions
Is forward flow the same as a loan?
No. The buyer purchases assets as they are created. A lending facility is a different structure, and independent capital providers offer both.
Can the originator keep servicing?
Often, under a servicing agreement.
What does the originator send to start?
The book tape and the originations record, so Criterica Capital can read how the assets have performed.
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