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Annuities for Retirement Planning

Advance Funding
By Julia Kagan
Updated December 19, 2021
Reviewed by Marguerita Cheng
What Is Advance Funding?

Advance funding refers to any advance made on an upcoming agreement or payment. The term"advanced funding" is very broad and may refer to a broad range of financial situations including individual or business loans and future contractual payments such as royalties or annuities and also government appropriations.

Advance funding can take a variety of different forms. A few examples of advance financing include: payday loans, viatical settlements and settlement advances for lawsuits. Most often, advance financing will involve an assignment of the contract or series of payments due in the near future or a an exemption from the amount of the payments that is sufficient to repay the advance. In most cases, the advance funding is discounted to reflect an imputed amount of interest.
The most important takeaways

Advance funding is an advance on a future commitment or payment.
The term advance funding is used in a broad sense and can involve a wide variety of financial scenarios that range to personal as well as project loans, future contractual payments such as royalties or annuities, and government appropriations.
Some examples of advance funding include: payday loans, viatical settlements, and lawsuit settlement advances.

Advance funding can also be described as the continuous process of building specific funds to finance the account to pay for future benefits, such as for a retirement plan.
Understanding Advance Funding

Many people have probably heard about the idea of lawsuit funding since commercials for these services run frequently on many televisions stations. Anyone who is the plaintiff in a lawsuit can apply for advance funding to pay for their living expenses or for other reasons as they wait for the anticipated settlement or amount of damages they might be awarded. In certain situations the advance money can be used to help pay the costs of surgeries or other medical treatments the injured or affected party may need.

Artists, writers, producers, and others involved in the creation or publication of artistic or literary works also frequently receive a form of advance funding. In this instance they are paid an initial initial payment, which is structured as an advance on future royalties or the anticipated proceeds generated by future sales.

Companies can also engage with suppliers who offer payroll financing services. Payroll financing can be advantageous for companies with cash flow problems and want to keep their payroll processes operating smoothly and continuously. This kind of financing is also commonly used by staffing companies. Payroll funding services offer this capital with a credit based on the business' assets. The applicants must satisfy certain requirements and get approval to advance the funds prior to receiving any funds.

Since the various kinds of advance funding structures run across the spectrum, so are the terms and conditions that are associated with these financial arrangements. The requirements for qualifying, the interest rates and fees and obligations of the person or entity receiving advance funds can differ greatly based on the circumstances.
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