Structured Finance

What is structured finance? Why is it offered? State some structured financing products.

Structured finance means a special type of financial arrangement made for big companies or institutions

that have complex money needs which normal bank loans can’t meet.

It is used when a business needs a large amount of money and has to manage risks in a smart way.
So, banks create a custom financial plan for them — called structured finance.

Why it is offered:

It is offered to help large businesses or organizations that:

• Need huge funds (a big amount of money).
• Have unique or complex financial situations.
• Cannot get what they need from regular loans.

Examples of structured finance products:

1. Asset-backed securities (ABS) – loans or debts backed by company assets.
2. Mortgage-backed securities (MBS) – loans backed by home or property mortgages.
3. Collateralized mortgage obligations (CMOs) – a mix of different mortgage loans.
4. Collateralized debt obligations (CDOs) – loans or bonds grouped together and sold to investors.
5. Syndicated loans – large loans shared by several banks for one borrower.