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  • Hub You - Advantages of Trade Receivables Securitization

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    ng and other facilities for purchasing the best receivables.
    8) You can customize facilities provided by Trade Receivables Securitization to the needs of your business.
    9) Trade Receivables Securitization offers non-recourse facilities to the seller.
    10) Since the participation of the Selling party is not revealed to investors, you have a means of anonymo
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    Trade Receivables Securitization refers to the sale of a large stock of receivables to a specially created legal entity that cannot be sued for bankruptcy. It also involves issuing debt securities by this entity. Once the sale is completed, there is cash flow from investors who bought the securities to the specially created entity (Issuer), and the parent company (Originator).

    Advantages of Trade Receivables Securitization:

    Trade Receivables Securitization has many advantages, especially for the Originators. We discuss some of them here.

    1) The receivables are not counted in the balance sheet since they are replaced by their equivalent in cash. This improves the originator’s financial statement.
    2) The Originator does not have to wait for payments to be received from the receivables. It can continue getting profits even without receiving the payments immediately.
    3) The securities are ranked high by credit rating agencies. This means there is no need to pay huge interests. If the Originator has to pay interest, then it is not too high.
    4) There is no need for dividends as assets and other liabilities can be coordinated.
    5) It helps in smooth transactions, as the Originator is also the servicer, abolishing the need to give notice to those who are the beneficiaries under the receivables.
    6) Investors get to trade in capital markets that have better funding costs.
    7) Trade Receivables Securitization provides dedicated funding and other facilities for purchasing the best receivables.
    8) You can customize facilities provided by Trade Receivables Securitization to the needs of your business.
    9) Trade Receivables Securitization offers non-recourse facilities to the seller.
    10) Since the participation of the Selling party is not revealed to investors, you have a means of anonymou

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    Advantages of Trade Receivables Securitization:

    Trade Receivables Securitization has many advantages, especially for the Originators. We discuss some of them here.

    1) The receivables are not counted in the balance sheet since they are replaced by their equivalent in cash. This improves the originator’s financial statement.
    2) The Originator does not have to wait for payments to be received from the receivables. It can continue getting profits even without receiving the payments immediately.
    3) The securities are ranked high by credit rating agencies. This means there is no need to pay huge interests. If the Originator has to pay interest, then it is not too high.
    4) There is no need for dividends as assets and other liabilities can be coordinated.
    5) It helps in smooth transactions, as the Originator is also the servicer, abolishing the need to give notice to those who are the beneficiaries under the receivables.
    6) Investors get to trade in capital markets that have better funding costs.
    7) Trade Receivables Securitization provides dedicated funding and other facilities for purchasing the best receivables.
    8) You can customize facilities provided by Trade Receivables Securitization to the needs of your business.
    9) Trade Receivables Securitization offers non-recourse facilities to the seller.
    10) Since the participation of the Selling party is not revealed to investors, you have a means of anonymo

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    does not have to wait for payments to be received from the receivables. It can continue getting profits even without receiving the payments immediately.
    3) The securities are ranked high by credit rating agencies. This means there is no need to pay huge interests. If the Originator has to pay interest, then it is not too high.
    4) There is no need for dividends as assets and other liabilities can be coordinated.
    5) It helps in smooth transactions, as the Originator is also the servicer, abolishing the need to give notice to those who are the beneficiaries under the receivables.
    6) Investors get to trade in capital markets that have better funding costs.
    7) Trade Receivables Securitization provides dedicated funding and other facilities for purchasing the best receivables.
    8) You can customize facilities provided by Trade Receivables Securitization to the needs of your business.
    9) Trade Receivables Securitization offers non-recourse facilities to the seller.
    10) Since the participation of the Selling party is not revealed to investors, you have a means of anonymo
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    s assets and other liabilities can be coordinated.
    5) It helps in smooth transactions, as the Originator is also the servicer, abolishing the need to give notice to those who are the beneficiaries under the receivables.
    6) Investors get to trade in capital markets that have better funding costs.
    7) Trade Receivables Securitization provides dedicated funding and other facilities for purchasing the best receivables.
    8) You can customize facilities provided by Trade Receivables Securitization to the needs of your business.
    9) Trade Receivables Securitization offers non-recourse facilities to the seller.
    10) Since the participation of the Selling party is not revealed to investors, you have a means of anonymo
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    ng and other facilities for purchasing the best receivables.
    8) You can customize facilities provided by Trade Receivables Securitization to the needs of your business.
    9) Trade Receivables Securitization offers non-recourse facilities to the seller.
    10) Since the participation of the Selling party is not revealed to investors, you have a means of anonymously reaching and trading in the commercial market.
    11) Trade Receivables Securitization allows the Originator’s bank and the credit company to be named as liquidity providers.

    It would be advisable to look into one disadvantage of the Trade Receivables Securitization process as well.

    Disadvantage of Trade Receivables Securitization: Trade Receivables Securitization increases costs. This means that you can securitize receivables, only when the securitization process can realize their values.

    The sheer flexibility of the securitization process allows you to securitize anything from credit card receivables to mortgages. It requires a record of accomplishment of 3-5 to be a creditable receivable pool. Since you need to have predictable and stable cash flow, the loan guarantee terms are automatically reduced.

    If you need to know more about Trade Receivables Securitization, you can approach a small business consultant for help. He or she will also help you set up your own legal entity for Trade Receivables Securitization. With the many advantages that Trade Receivables Securitization has, it is no wonder that increasingly small business is opting for it.

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