The Hidden Risks Inside SPV And Nontraditional Financing Structures: What Every Board And Lender Should Know

Special-purpose vehicles (SPVs) and other nontraditional financing structures have become increasingly common, particularly in asset-based lending, private credit, and structured financings where specific assets are used to support liquidity without encumbering an entire balance sheet.

When designed and executed properly, these structures can provide flexibility, improve liquidity, isolate risk, and facilitate capital formation—for example, by allowing a company to finance receivables or inventory through a bankruptcy-remote vehicle while preserving operating liquidity and providing lenders with clearly defined collateral and cash-flow protections. As a result, SPVs are frequently presented to boards, lenders, and investors as bankruptcy-remote, well-collateralized vehicles with clearly defined governance and risk boundaries.