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Structured finance

What is Structured Finance?

Structured finance is considered when the trade is too large for the usual bond and loan. There are numerous examples of structured finance, some of them are mentioned below:

  • Collateralized debt-obligations
  • Syndicated loans
  • Mortgage-backed securities

Once it comes to these types of financing, there are two types of financing instruments available in the market. Instruments like normal and vanilla financial instruments, although there are instruments such as mortgage or overdrafts, considering the credit strength of the borrower.

Since we have many borrowers with their unique requirements, therefore, with a unique borrower comes with unique financing instruments. Structured finance refers to an instrument which helps dampen risk when applied to securitizations of various assets.

The sole purpose of structured finance is to offer non-flow financing solutions and structured risk mitigation products for clients, especially when looking towards several industrial assets.

Importance of Structured Finance

One of the major reasons why this type of finance is important because of the parties involved. Parties may include institutions like banks since banks are considered huge, therefore, the sum available and circulation of the economy is massive.

What is Securitisation?

It can be defined as a process in which non-tradable assets are packaged together to form their financial instruments, issues than to an investor. Side by side, the investor will also attain interest from the instruments.

These instruments stand to increase liquidity in the market. MBS is considered a good example of structured finance. MBS dissolves mortgages into a large pool. Once the issuer asses the level of risks and the chance of payment default and creates similar smaller pools. These smaller pools are called “tranches” and investor based on their due-diligence and appetite for risk participate at different tranches.

Structured Note:

It is a debt security issued by a financier. The assets pool may include:

  • Equity indexes
  • Stocks
  • Commodities
  • Interest rates
  • Currencies

Requirements of Structured Finance:

Anyway in each case of structured finance is reviewed on a case by case basis, generally, financer asks the following applications:

  • Audited financial statements and cash flow statements
  • Trades, the margin, product and countries involved
  • Previous trading history
  • Financial forecasts and growth projections
  • Securities available
  • Details and references of the directors
  • Information on business assets and liabilities

Why structured Finance? (Benefits)

  • Helps in restricting debt
  • Timely payment
  • Make savings on repayments
  • Free up working capital to make cash flow efficient
  • Allows transferring involved risk
  • Increase asset liquidity
  • Reduced cost of funds
  • Streamlined execution
  • Detailed collateral analysis and due diligence

Structured Finance Product:

  • Derivatives
  • Securitized and collateralized debt instruments
  • Syndicated loans
  • (CMOs) Collateralized mortgage obligation
  • (CBOs) Collateralized bond obligations
  • (CDOs) Collateralized debt obligations
  • (CDSs) Credit Default Swaps and
  • Hybrid securities

Why connect2India for structured finance?

  • check_circle_outlineDedicated presence throughout all major import and export markets
  • check_circle_outlineA leading arranger and underwriter of major finance transactions
  • check_circle_outlineProven ability to develop as well as arrange required trade and export finance solutions
  • check_circle_outlineExcellent contacts with finance institutions and export credit agencies

Want to know more about structured finance? or looking for most suitable finance solution for you? Talk to our finance experts now.

Features of Connect2India finance

Why finance with Connect2India

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Easy processing

Complete online application process makes it easier for us to process forms faster and provide same day loan approvals.

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Fast disbursals

With online loan processing, business loan is disbursed within 3-5 business days of loan approval.

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Collateral free loans

No need to put your valuable assets in risk, we have unsecured loan that do not require any collateral.

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Fair interest rates

Our advanced algorithms determines the best rates for the type of loan you business require.

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No hidden costs

There will be no hidden costs or any other charges involved. Only processing fee of 2% is charged

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Flexible repayments

Loan repayment structure can be customized depending upon how your business is growing.