Cash flow is an issue for anyone running a business.  It can be especially challenging when you’re running a real estate business because of the elapsed time it takes to get paid. 

First, there’s the time required to sell a home that you’ve listed or to find the right home for a buyer.  Even after the deal is “closed” in terms of having a signed contract, there is another delay between the contract and the date of closing, and another period of time passes before a check is actually received.

I ran across an interesting article on RISMedia that describes an alternative for stablizing cashflow I hadn’t heard of before:  commission advance companies.  There are companies that will lend money against a company’s accounts receivable, but lending against a commission was new to me.

Getting an Advance on Commissions

Three companies were mentioned in the article:  eCommission, Agent’s Advance and Commission Express.  Brokers contacted by RISMedia identified eCommission as the most trusted firm, and the article identifies why brokers made that choice. 

Naturally, the advance is not free, and the fee charged can range from 8-15%.

 eCommission – Summary

This information will give you a bit of an overview as to some of the rules at least one of the commission advance companies follow.

eCommission will process an advance for most types of residential transactions.  You need a signed purchase agreement, and the closing must be scheduled within 120 days for a resale property, or 180 days for new construction.  Land deals may qualify, but no commercial transactions are considered.

You can establish an account with eCommission at any time, but your broker must be registered there, also, before you can request an advance.  eCommission states that they will deliver advances within 24 hours.

Your credit is reviewed and has an impact on the amount of interest you will pay.  You can get an advance for up to 90% of your commission up to $10,000.

There are many other stipulations, of course, that you can review online.

Whether or not this approach makes sense for you is a decision you would have to make after a careful review of the alternatives and your own finances.

However, it might be worth considering this approach if you run into cash flow issues.  You may not want to get an advance for the entire amount possible.  But, if even a few thousand dollars will simplify your accounting between paydays, this might be an answer.