What is Securitisation? Types, Process, and Key Insights
Explore what securitisation is and how it helps businesses access funding by converting assets into tradable securities. Understand its types and benefits.
Securitisation has become a key tool in India’s financial sector, with volumes rising by 80%, now estimated at Rs 2.4 lakh crore. This increase highlights its growing role in enhancing liquidity and providing businesses with an alternative source of funding.
While traditional financing options remain a challenge for many, securitisation offers a way to access capital by pooling assets like loans and receivables. However, without understanding the process, businesses risk missing out on a vital financial strategy.
Key Takeaways
- Securitisation helps businesses convert assets like loans into tradable securities for quick cash.
- Common types include asset-backed securities, mortgage-backed securities, and debt obligations.
- The process involves pooling assets, creating a special purpose vehicle, and selling securities to investors.
- The right securitisation type depends on your assets, funding needs, and investor risk preferences.
- Recur Club simplifies securitisation, offering solutions tailored to business needs.
What is Securitisation?
Securitisation is the process of converting financial assets, like loans, mortgages, or receivables, into tradable securities that can be sold to investors.
In simpler terms, it allows lenders or companies to free up locked capital by selling future cash flows from these assets.
For instance, consider a bank having a large number of car loans. Instead of waiting for the loans to be paid off over time, the bank bundles these loans and sells them as a security to investors. The investors get returns as the car loans are repaid.
Also Read: Securitized Debt Instruments Explained: A Smart Liquidity Option for Indian SMEs
Types of Securitisation
| Type | Description | Example |
|---|---|---|
| Pay-through Debt Instrument | Payments are passed through to investors. | Mortgage-Backed Securities (MBS) |
| Pass-through Securitisation | Principal and interest payments on the underlying assets pass through to the investors. | Residential Mortgage-Backed Securities (RMBS) |
| Collateralised Debt Obligation (CDO) | Securitisation of pooled debt instruments structured into tranches. | Corporate CDOs Asset-Backed CDOs (ABCDOs) |
If your business has predictable receivables or recurring revenue, it may be worth exploring whether securitisation-style financing fits your needs. Platforms like Recur Club offer ways for businesses to make use of their cash flows more efficiently.
What are Different Securitised Assets?
| Type | Description | When to Use |
|---|---|---|
| Mortgages | Loans backed by real estate properties that are sold as Mortgage-Backed Securities (MBS). | When securitising large pools of home loans to attract investors looking for stable returns. |
| Student Loans | Loans given to students, bundled and sold as Student Loan Asset-Backed Securities (SLABS). | When pooling student loans to secure financing for education or to offload risk to investors. |
| Auto Loans | Loans secured by vehicles, grouped into Auto Loan Asset-Backed Securities (ABS). | When converting auto loan receivables into cash flow by securitising them to investors. |
| Credit Card Receivables | Credit card debt bundled into securities sold to investors. | When securitising unpaid credit card balances to raise funds for issuing new credit. |
Steps Involved in the Process of Securitisation
- Asset Selection: Choose the underlying assets (e.g., loans or receivables) for securitisation.
- Special Purpose Vehicle (SPV) Creation: Set up an SPV to hold the assets and issue securities.
- Asset Pooling: Pool the selected assets into a single portfolio.
- Issuance of Securities: The SPV issues securities backed by the asset pool to investors.
- Sale of Securities: Sell the issued securities to investors.
- Servicing the Assets: Collect payments from the underlying assets and distribute them to investors.
If this process feels overly complex for your business stage, simplified alternatives exist. Recur Club handles much of the structuring and lender coordination, helping teams navigate financing without deep technical expertise.
Pros and Cons of Securitisation
| Pros | Cons |
|---|---|
| Provides liquidity for businesses and financial institutions. | Complex and costly to structure. |
| Allows for risk distribution by pooling assets. | Risk of default if underlying assets perform poorly. |
| Access to diversified investment options. | Regulatory challenges and legal complexities. |
| Helps businesses manage working capital and reduce debt burden. | Potential for reduced transparency for investors. |
How to Choose the Right Securitisation Type?
- Asset Type: Assess the type of assets you want to securitise (e.g., loans, receivables, mortgages).
- Funding Needs: Consider how quickly you need liquidity and the amount required.
- Investor Risk Tolerance: Evaluate the risk tolerance of your investors.
- Cost and Complexity: Evaluate the setup cost and the complexity of each securitisation type.
- Regulatory Requirements: Review the regulatory requirements for the chosen securitisation type.
- Investor Risk Tolerance: Match the securitisation type with the risk appetite of your investors.
How Recur Club Helps in Securitisation?
Recur Club simplifies securitisation by providing access to funding through its platform, enabling businesses to securitise their receivables.
We offer:
✔ 15+ credit structures to meet diverse financing needs
✔ Working capital solutions to keep operations running smoothly
✔ Secured and unsecured options tailored to your eligibility
✔ Expert capital advisory to guide the right debt structure
✔ Up to ₹100 Crore in capital for expansion or cash flow support
✔ 150+ lenders to secure competitive deals quickly
✔ Customised financing aligned with your revenue forecasts and cash cycles
Conclusion
Securitisation offers businesses a way to access liquidity by converting assets into tradable securities, helping manage financial risks. Understanding the process allows businesses to choose the right structure for their funding needs.
Recur Club simplifies this process, helping businesses access tailored capital solutions that suit their specific needs.
FAQ
Q: What is securitisation in simple terms?
A: Securitisation is the process of turning assets like loans or receivables into tradable securities, allowing businesses to access funding by selling them to investors.
Q: How does securitisation work?
A: Securitisation involves pooling assets, creating a special purpose vehicle (SPV) to issue securities backed by those assets, and selling them to investors.
Q: What are the different types of securitisation?
A: The main types include asset-backed securities (ABS), mortgage-backed securities (MBS), collateralised debt obligations (CDOs), and collateralised loan obligations (CLOs).
Q: What are the advantages of securitisation?
A: Securitisation provides businesses with liquidity, transfers risk to investors, and offers access to capital markets.
Q: How do I choose the right securitisation type?
A: Consider the type of assets you have, your funding needs, investor preferences, and the complexity of each to determine the best securitisation type for your business.
Related Articles
Zingbus Funding Journey: Scaling Intercity Travel
Discover how Zingbus scaled to 300+ cities with $5.5M equity and debt funding from Recur Club, fueling growth with flexible, non-dilutive capital in India’s mobility space.
Growth Capital vs Venture Capital in India: A Practical Comparison for 2026
Growth capital vs venture capital isn’t just about dilution. Learn how each affects cash flow, control, and scaling decisions.
Working Capital Management: Practical Strategies for Founders
Learn working capital management strategies to maintain cash flow, handle short-term expenses, and support growth for founders and startups.
Talk to our experts and find the right financing solution.
Talk to Our Experts →