Securitization is a financing term that the average finance person is not commonly used, let alone the average layperson who has no detailed knowledge of business financing and alternative financing.
The term 'securitization' became increasingly well known during the financial and liquidity crisis that the world experienced in 2008/2009. We discovered that one of the main causes of the worldwide financial collapse was, in effect, the securitization and marketing and sale of mortgages.
WHAT IS SECURITIZATION - HOW DOES IT WORK?
Securitization is an alternate form of funding underlying assets for corporations. When it works well, it is an excellent source of funding for many organizations. Securitization is a form of structured finance, primarily for asset backed securities on the balance sheet. It frees up cash on the balance sheets and allows companies to grow receivable and loan portfolios. Funding of tranches can be structured in a variety of ways
How does it work? A company or organization takes certain assets that various investors desire. These assets are most typically receivables, contracts, car loans, credit cards, mortgages on the balance sheet. The quality of these assets is key in the entire securitization process. We watched the financial world fall apart when people discovered those securitized mortgages bundled in the United States had a shallow credit quality when it came to credit risk!
One of the reasons investors like securitized assets is that the risk is spread among hundreds, probably thousands of different borrowers. This diversifies risk. We continually hear how one needs to diversify to control risk, whether in business or our personal financial affairs. The cash flows that come out of that pool of assets back up the investment's quality by the buyer of the securitized asset.
For a transaction to be properly securitized, there has to be a strong predictability in the repayment of the loans, leases, mortgages, etc.
HOW IS A SECURITIZATION STRUCTURED?
How are Securitized loans structured? The assets become known as a 'pool' of assets. Financial analysts or the credit rating agencies (Standard & Poors, etc.) assign a credit rating to this newly created SPV (Special Purpose Vehicle). Investors buy this pool of assets because they theoretically understand the asset quality and the risk. There are many subsets to the risk we won't cover in our article - for example, concentrations of assets or customers.
The pool of assets is usually 'serviced' by the seller. He collects and maintains the portfolio - of course; he also created the portfolio of assets. The ongoing collection of the portfolio flows back to the investors who purchased it.
Securitization has become more and more popular because it has provided great liquidity to the financial markets.
HOW TO UNDERSTAND THE SECURITIZATION FLOW CHART
In summary, the securitization flow chart is as follows:
A seller creates the assets
An SPV is formed around those assets
Investors purchase the SPV
A trustee monitors the flow of cash, collections, etc.
Of course, as one can imagine, all sorts of lawyers, accountants and financial analysts have a healthy hand in various aspects of the above process flow!
WHAT ARE THE BENEFITS OF SECURITIZATION
* It provides cash flow to many companies who would otherwise have to wait years for customer payments, etc.
* Profits from the sale of the pool of assets allow a company to grow and create more assets.
* When properly structured, there are certain balance sheet enhancements - i.e. the company selling the pool gets cash but does not take on debt.
CONCLUSION
If you are looking for securitization financing speak to 7 Park Avenue Financial, a trusted, credible and experienced Canadian business financing advisor who can assist you on cash flow solutions for companies that have current funding and liquidity needs.
' Canadian Business Financing With The Intelligent Use Of Experience '
STAN PROKOP
7 Park Avenue Financial/Copyright/2026
CANADIAN BUSINESS FINANCING
ABOUT THE AUTHOR: Stan Prokop is the founder of 7 Park Avenue Financial and a recognized expert on Canadian Business Financing. Since 2004 Stan has helped hundreds of small, medium and large organizations achieve the financing they need to survive and grow. He has decades of credit and lending experience working for firms such as Hewlett Packard / Cable & Wireless / Ashland Oil
Privacy Policy
Effective September 13, 2026
7 Park Avenue Financial collects information you voluntarily provide, such as your name, contact details, company information and financing requirements. We use it to respond to inquiries, assess financing needs and, with your consent, share relevant details with potential lenders or service providers.
We do not sell personal information. We use reasonable safeguards, retain information only as necessary and disclose it when authorized or legally required. Our website may use cookies and analytics to improve performance.
To access, correct or request deletion of your information, contact:
Stan Prokop
sprokop@7parkavenuefinancial.com
416-319-5769
This policy may be updated periodically.
Terms of Service
Effective Date: September 15, 2026
By using www.7parkavenuefinancial.com, you agree to these Terms of Service. If you do not agree, please discontinue using the website.
General Information
The website is operated by 7 Park Avenue Financial and provides general information about Canadian business financing. Website content does not constitute financial, legal, tax or accounting advice.
Financing Disclaimer
7 Park Avenue Financial is a business financing advisor, not a guarantee of funding. Financing approvals, rates, terms and funding amounts are determined by lenders and are subject to eligibility, due diligence, credit approval and final documentation. Information submitted through this website does not create a lender-borrower, advisor-client or other professional relationship.
Website Use
You may use this website only for lawful purposes. You may not misuse the website, attempt unauthorized access or copy, republish or commercially exploit its content without written permission.
Accuracy and Third-Party Links
We aim to provide accurate and current information but do not guarantee that all content is complete, error-free or suitable for every situation. Third-party links are provided for convenience, and 7 Park Avenue Financial is not responsible for external websites, services or content.
Limitation of Liability
To the fullest extent permitted by law, 7 Park Avenue Financial is not liable for losses arising from reliance on website content, website interruptions, third-party services or financing decisions made by independent lenders.
Privacy
Personal information submitted through the website is handled according to our Privacy Policy.
Changes to These Terms
We may update these Terms of Service at any time. Changes become effective when posted on this page.
Governing Law
These terms are governed by the laws of Ontario and the applicable laws of Canada.
Contact
Questions about these terms may be submitted through www.7parkavenuefinancial.com.
