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 to respond to inquiries and assess your financing needs. With your consent, we may 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 request access, corrections or deletion of your information, contact Stan Prokop using the details below.
Terms of Service
Effective September 15, 2026
By using this website, you agree to these terms.
Information and Financing
Our content provides general information about Canadian business financing and does not constitute financial, legal, tax or accounting advice.
7 Park Avenue Financial is a business financing advisor. Funding is not guaranteed. Lenders determine approvals, amounts, rates and terms, subject to eligibility, due diligence and final documentation. Submitting an inquiry does not establish a professional relationship.
Website Use and Liability
Use this website lawfully. Unauthorized access, misuse and copying or commercial reuse of content without written permission are prohibited.
We aim for accuracy but do not guarantee complete or error-free content. We are not responsible for third-party websites. To the extent permitted by law, we are not liable for losses arising from reliance on website content, interruptions, third-party services or independent lenders’ financing decisions.
Privacy, Updates and Governing Law
Personal information is handled under our Privacy Policy. Both policies may be updated; changes take effect when posted. These terms are governed by Ontario law and applicable Canadian law.
Contact Us
Stan Prokop — 7 Park Avenue Financial
Email: sprokop@7parkavenuefinancial.com
Phone: 416-319-5769
Website: www.7parkavenuefinancial.com
