The Next Chapter for ABS

Behind every asset-backed security is a financing decision. As companies seek more flexible ways to raise capital, securitization has become an increasingly important tool within a broader financing ecosystem.

A company wants to expand its business.

Another company is looking to free up capital tied to thousands of auto loans. Another wants to finance equipment, transportation assets or consumer receivables without relying solely on traditional bank lending.

Different companies. Different industries. Different financing needs.

Yet they may all arrive at the same capital markets solution: Securitization technology, through securitization financing and asset-backed securities (ABS).

Unlike a syndicated loan or a corporate bond, an ABS transaction begins with assets that already exist on a company's balance sheet. Those assets, whether auto loans, equipment leases, trade receivables or other predictable cash flows, can become the foundation for a financing strategy that connects issuers with institutional investors.

"One of the biggest misconceptions is that companies decide they want to do an ABS transaction," says Sang Han, Managing Director for ABS Syndicate and Structuring at BBVA CIB. "In reality, they're trying to solve a financing challenge. Securitization is one of several tools that may help them achieve that objective."

It starts with a financing challenge.

Companies today have more financing options than ever before. Traditional bank lending remains essential, but it is increasingly complemented by products such as syndicated loans, debt capital markets and securitization. Rather than competing with one another, these financing solutions often work together, giving companies greater flexibility to manage liquidity, diversify funding sources and support long-term growth.  There are also situations where private companies don’t have access to the corporate bond market  and their best capital markets option is the ABS market.  

Another benefit that issuers are able to access is the  favorable funding levels as their assets may be structured to allow them to achieve AAA ratings.

For businesses with pools of predictable cash-flow-generating assets, ABS can become an important part of that broader capital strategy.

"The conversation has shifted," Han says. "It's less about choosing one financing product over another and more about identifying the right combination of financing solutions for a company's specific objectives based on their current situation.  ABS provides issuers with diversification of funding options and having the power to mix funding tools allow them to access the most efficient market and  if one market is closed, they can access the other market."

Turning assets into capital

Every ABS transaction follows the same fundamental principle: transforming existing financial assets into securities that can be purchased by investors.

While the concept is straightforward, the process brings together specialists across origination, structuring, syndication, sales, legal, ratings and trading, all working toward a common objective of efficiently connecting capital with opportunity.

As the U.S. economy has evolved, so has the range of assets that can be securitized.

Although the market remains well known for auto loans, credit cards and residential mortgages, today's transactions increasingly include equipment finance, digital infrastructure, transportation assets such as aircraft, rail and container, specialty finance such as consumer and home improvement loans and other forms of predictable cash flows.

"The economy changes, and financing solutions change with it," Han says. "As companies develop new business models and new asset classes emerge, securitization continues to adapt."

Connecting issuers and investors

Every successful ABS transaction depends on two groups whose objectives naturally complement one another.

Companies are looking for efficient access to capital and diversified funding sources. Investors are seeking exposure to different sectors of the economy, diversified collateral and financing structures that complement more traditional fixed-income investments.

The capital markets bring those objectives together.

"Investors are looking for diversification," Han says. "ABS provides exposure to a broad range of assets and industries, while giving issuers another way to access capital."

Continued improvements in transparency, reporting standards and transaction structures have also strengthened the market, supporting greater confidence among institutional investors.

Part of a broader financing ecosystem

Perhaps the biggest change in recent years is not the ABS market itself, but the way companies think about financing.

Rather than relying on a single source of capital, businesses increasingly combine bank lending, capital markets and alternative financing solutions to build more resilient funding strategies.

Within that ecosystem, securitization is not a niche product. It has become another tool companies can use to support growth, improve capital efficiency and reach different pools of investors.

"The underlying concept hasn't changed," Han says. "What continues to evolve is how companies are using securitization to support increasingly sophisticated financing strategies."

That evolution is likely to continue. The market has grown steadily over the past decade, as issuance volumes have gone from approximately $240 billion pre-pandemic to an expected $400 billion in 2026.

As new industries emerge, business models change and financing needs become more specialized, securitization will continue adapting alongside them, helping companies connect assets with capital and investors with new opportunities.

For many businesses, the question is no longer whether ABS replaces other financing solutions. Instead, it is where securitization fits within a broader capital strategy designed to support long-term growth.