Asset Securitization is used to monetize predictable streams of cash flows such as loans, leases, receivables, royalties or other predictable cash flows. Asset backed securitization allows issuers to obtain a lower cost of funding than would be available to them through more traditional sources of financing.
This type of financing improves liquidity and asset/liability management for the issuer, providing flexibility in the capital structure and allowing for rapid growth. It provides an issuer the ability to fully leverage assets and minimize capital constraints.
Typical benchmarks for asset securitizations:
- Minimum transaction size for a term securitization of assets is $20 million to $25 million; conduit securitization requires a $75 million to $100 million minimum
- Issuer should generate a recurring and significant amount of asset to be securitized (minimum of $2 million per month on term securitization)
- Credit underwriting, collection procedures and system capability are vital to a company’s ability to securitize assets
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