Securitization may give you access to gold nuggets when your business is still producing pebbles, but inadequate regulation and other risks can ruin your Midas touch. Richard Li explores the key issues
Suppose your company is running short of money to support daily operations, or maybe further expansion – both quite likely scenarios – where do you find the cash? Banks may be hesitant to lend, a public offering may still be a faraway dream, and the bond market may not open its door to companies without a strong credit rating. But securitization can perhaps work wonders for you.
Securitization was once blamed for causing the 2007-2008 global financial crisis, but with necessary risk control rules in place its basic function of turning illiquid assets into cash in hand can help many in need, especially small and medium-sized companies, when the economy is in the doldrums.