From Zeta Financial:
"Perhaps the greatest advantage of securitization is that it creates liquidity in the marketplace for the assets being securitized. This helps a company with debt on its books remove that debt from its balance sheet and acquire new funding in place of that debt. This is done by transforming that debt into securities through the process described above. As a result, the company would have received liquid funds in exchange for the debt that it has moved into securities. Even more attractively, removing that debt of its balance sheets may help to raise that company’s credit rating, thus allowing it to raise funds more cheaply than if that debt had remained on its balance sheets. However, transforming that debt into securities need not mean removing the account associated with that debt. Hence, these companies remove the risk of the debt, turn it liquid, but still earn income through the maintenance of that account. Another advantage is that these debts can be layered into different tranches with different risks. These offer great choice to investors as through these tranches investors have access to returns and risk that more closely match their appetites. For example an ultra-cautious investor may choose to invest in securities rated at AAA, meaning that they will be the first to receive a return on income, but with the lowest rate of that income. An investor that has a higher risk appetite may choose to invest in BBB securities, meaning that they will have to wait until the investors in higher rated securities have been paid off, but in return they will receive a higher rate of income of their securities. Securitization also has advantages for borrowers. Given that securitization allows companies to efficiently use the debt on their books and make it liquid, while giving investors a range of attractive options for investment, securitization means that these debt assets are valuable and attractive. Hence, companies compete in offering loans to borrowers and this competition leads to all sorts of advantages for these borrowers, including more competitive rates, cheaper financing, more choice and quicker processing times. Essentially, with securitization, companies compete for the custom of borrowers, whose loans they can transform into securities to enjoy the benefits outlined above."
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