In brief - Proposed Fund will enhance SMEs' access
to funds and aims to prioritise investment in underdeveloped
sectors
At the end of 2018 the Federal Government announced that it will
establish a $2 billion Australian
Business Securitisation Fund to invest in warehouse facilities
and securitisations backed by small and medium enterprise (SME)
loans.
What is securitisation and what are warehouse facilities?
Securitisation is a method of funding whereby the cash flows
from illiquid assets (such as loans) are packaged in tranches into
tradeable debt securities, with each tranche having different risk
characteristics. The cash flows from the underlying loans are used
to make interest and principal payments to investors. Unlike a
normal bond, these securities only have recourse to the underlying
assets; there is no recourse to the originator of the assets.
