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Page written by Chris Godfrey. Last reviewed on July 8, 2025. Next review due April 6, 2026.
When commercial mortgages, loans and other forms of traditional business financing fall short of your organisation’s needs, a structured finance solution could pave the way to larger sources of capital, increased financial flexibility and more options to reduce risk.
Structured finance is a sophisticated financial solution to complex financing needs that conventional financial products such as small business loans or mortgages cannot satisfy. Structured finance is primarily utilised by large corporations or institutions requiring substantial capital or tailored solutions for unique projects or risk management. The core mechanism of structured finance is securitisation (collateralisation), which involves pooling together various financial assets, such as loans, mortgages, or receivables, into a single entity, often a Special Purpose Vehicle (SPV). The SPV issues securities backed by the pooled assets, which are then sold to investors to raise new capital.
As noted above, structured finance functions by pooling financial assets—such as loans, mortgages, or receivables—into a single entity, which then issues securities backed by these assets. This process allows originators (such as banks or lenders) to transfer risk and improve liquidity by converting illiquid assets into tradable securities that can be sold to investors.
The UK has a robust legal and regulatory framework for structured finance. Regulators, including the Financial Conduct Authority (FCA), oversee the market to ensure compliance, protect investors, and maintain financial stability. Structured finance transactions must adhere to specific consumer credit laws and the Consumer Duty, ensuring good outcomes for consumers whose loans are securitised. Investor due diligence will typically focus on compliance with these regulations, as non-compliance can affect the recoverability of assets and returns to investors.
Structured finance can support a wide range of businesses, including:
Structured financing can offer large corporations innovative solutions to secure capital for complex or ambitious projects that may not qualify for traditional loans. By pooling assets and creating tailored financial instruments—such as asset-backed securities or collateralised loan obligations—companies can access significant funding beyond conventional limits, often with flexible terms. This approach supports risk management by transferring certain risks to investors and can provide off-balance sheet benefits, improving financial ratios.
Structured finance supports mergers, acquisitions, and growth initiatives, allowing corporations to restructure debt, enhance liquidity, and pursue strategic objectives without overleveraging or diluting ownership.
Real estate developers use structured finance to fund complex or large-scale projects that traditional lenders may not support. By combining senior debt, mezzanine finance, and equity, structured finance can cover up to 100% of project costs, enable access to larger capital sums and allow developers to optimise cash flow, better manage risk, and quickly adapt to changing project needs.
Structured finance can offer significant advantages to infrastructure and project finance firms – providing bespoke, large-scale funding solutions tailored to complex, capital-intensive projects.
Securitisation can unlock substantial investment capital, enabling firms to fund major infrastructure developments or regeneration projects that might otherwise be non-viable due to high upfront costs or long payback periods. Structured finance also facilitates risk sharing, improves liquidity, and allows for flexible repayment structures, aligning financing with project cash flows.
Like all financial products and solutions, structured finance has advantages and disadvantages:
Pros
Cons
Structured finance and traditional business loans serve different purposes in the UK business landscape. Traditional business loans—such as secured or unsecured loans, term debt, and revolving credit lines —are typically straightforward, offering funds based on creditworthiness, business performance, or collateral such as property or equipment. Repayments are regular and fixed, and the lender’s risk is mitigated through collateral or robust credit checks.
By contrast, structured finance is more complex and tailored. It involves pooling assets, creating securities, and using SPVs to raise large-scale capital or solve specific business challenges, such as acquisitions or debt restructuring. Ultimately, structured finance is suited for larger, more sophisticated financing needs, offering flexibility and customisation beyond what traditional loans can provide but with the added challenges of greater complexity and higher regulatory requirements.
Although all structured finance works by pooling an array of assets into an entity that can use those assets to raise cash, there are differences between various types of structured finance solutions:
Asset-backed securities (ABS) are bonds secured by a pool of underlying assets such as mortgages, car loans, credit card receivables, or student loans. Financial institutions or lenders bundle these loans together and transfer them to a SPV. The SPV then issues securities to investors, who receive payments from the interest and principal repayments made by the original borrowers. This process converts illiquid individual loans into tradable securities, providing liquidity for the originator and offering investors diversified risk and potentially higher yields compared to conventional bonds.
Collateralised loan obligations (CLOs) are securities backed by a pool of mostly corporate loans—often leveraged or syndicated loans to companies with below-investment grade ratings. A CLO manager assembles these loans into a portfolio and issues different tranches of debt and equity to investors, each with varying levels of risk and return. Senior tranches are paid first and are less risky, while junior tranches offer higher potential returns but bear more risk. CLOs can enhance liquidity and diversify, but they must be actively managed to optimise performance.
Mezzanine financing is a hybrid funding solution that combines elements of debt and equity. It is often used to bridge the gap between senior loans and owner equity for growth, acquisitions, or buyouts. This type of funding is typically unsecured, subordinated to senior debt, and may include equity features such as warrants or conversion rights, where, if the borrower defaults, the lender can convert the loan into company shares. Mezzanine finance can give businesses access to larger sums than traditional loans. It typically offers flexible repayment terms and is repaid after senior debt but before equity in cases of insolvency.
UK businesses seeking structured finance will typically start the process by approaching specialist lenders or structured finance providers. The application process usually involves an initial discussion to outline the business’s funding needs and the assets available for collateral, such as receivables, property, or plant and machinery. The lender will provide a decision in principle within a short period—often within 48 hours—if the proposal meets basic criteria.
Once agreed, the business will work closely with a dedicated deal team and relationship manager to compile necessary documentation, which may include financial statements, asset valuations, and legal paperwork. The lender will assess the assets, business viability, and compliance with financial covenants. If approved, tailored legal agreements are prepared, and the structured finance facility is set up, offering flexible funding solutions aligned with the business’s specific financial requirements.
You can search for structured finance by approaching specialist lenders and structured finance providers one by one. However, this process can be slow and complicated and could take weeks or months to find a suitable financing partner. Alternatively, you could use the services of a finance marketplace. This type of online platform works with a large pool of financing sources and can immediately introduce you to a range of structured finance providers. They may also be able to give you advice and help you with the application process. This can be especially useful for businesses who have never applied for structured finance before.
Structured finance isn’t the only game in town. There may be other ways to get the funding your business needs.
Private equity (PE) involves investment firms providing capital to businesses—typically those not listed on public markets—in exchange for an ownership stake. Private equity firms raise funds from institutional and high-net-worth investors, then search for promising companies that need growth, restructuring, or expansion capital. PE investors provide funds using a mix of equity and debt, often taking an active role in the management of the business to drive value. The aim is to improve the business over several years, then exit through a sale or initial public offering (IPO), generating returns for both the PE firm and the business.
Venture capital is funding provided by investors in exchange for shares in the company. Venture capital is typically used by startups and fast-growing businesses to get a business off the ground or drive rapid expansion. Unlike traditional financing, venture capital relies on the future potential of the business to support the funding instead of relying on hard assets such as property and equipment or personal guarantees. This can make venture capital a good option when avenues to more traditional sources of funds are closed. However, while this type of financing can provide substantial funding and strategic support, it also means giving up some ownership and control to investors who typically expect high returns and want a say in key decisions.
Corporate bonds enable businesses to raise capital by borrowing from investors. The company issues bonds—essentially IOUs—to the market, promising to pay investors regular interest until a set maturity date, when the original amount (principal) must be repaid. The funds raised can finance expansion, acquisitions, or refinancing. Note that corporate bond investors become creditors, not owners, and are prioritised over shareholders if the business faces insolvency.
This financing method can offer companies flexible, long-term funding without diluting ownership, while providing investors with predictable income but with some risk of default
Working with business finance experts can make all the difference when applying for funding. Contact Swoop to discuss your financial needs, get help with your application and to compare high-quality structured finance deals from a choice of providers. Get the large-scale capital boost your business deserves. Register with Swoop today.
Written by
Chris is a freelance copywriter and content creator. He has been active in the marketing, advertising, and publishing industries for more than twenty-five years. Writing for Barclays Bank, Metro Bank, Wells Fargo, ABN Amro, Quidco, Legal and General, Inshur Zego, AIG, Met Life, State Farm, Direct Line, insurers and pension funds, his words have appeared online and in print to inform, entertain and explain the complex world of consumer and business finance and insurance.
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