As alternative lenders scale, most will move from corporate facilities and overdrafts on bank standard forms to consider a "specialty finance" facility.
These facilities offer non-bank lenders their first taste of asset-backed lending and are a valuable tool in the early stages of a specialty lending business.
However, as specialty lending business grow even further, the logical next step is often to "jump" to a securitised warehouse structure (while noting that, for some originators, increasing existing borrowing (by utilising accordion features, bringing in additional senior lenders or new mezzanine lenders) may be more appropriate).
These securitised warehouse facilities are more scalable products offering favourable pricing and providing access to a new market of lenders looking to gain exposure to the originator's products.
This article sets out ten key points of difference between specialty finance and securitised warehouse structures. We hope that it is helpful to those looking to make the jump.
