Securitization creates liquidity for previously illiquid assets, at a lower cost than most traditional financing instruments. Virtually any monetary asset with a contractual payment flow can be securitized.

Benefits:

Raises capital for companies with contractually committed future cash flows, such as royalties or other non-executory contracts Ideal for entities with physical assets whose value may depend on the quality of management and servicing, such as aircraft, vehicles or containers Transfers risk via several different structures, with banks, insurance companies or institutional investors assuming risk Provides investors with almost any level of risk, from AAA to non-investment grade Clients can retain anonymity through certain instruments, such as Asset Backed Commercial Paper (ABCP) On- or off-balance-sheet programs can be structured under current U.S. accounting standards

Because securitization transactions are driven by rating agencies and investor appetites, equity requirements can be higher for inexperienced or thinly capitalized issuers. There is also a potentially higher nominal cost of funding for non-investment-grade issuers.