Practical Issues Of Asset Securitization Financing

Financing is an eternal topic in business development and financial management. Both in daily operations and expanded reproduction, when facing a shortage of funds, the enterprises will need to make a decision to choose financing instrument. Because financing instrument is not only related to financing costs, it also has affection on operational efficiency. Today, most China's enterprises (non-financial organization) face financing difficulties; the mode of financing is mainly concentrated in bank borrowings and equity financing. On one hand, it results in corporation borrowing occupy a major share of bank loans, on the other hand, it cause assets-liabilities ratio increasing. Even to the existing mode of financing, they are not suitable for all enterprises because of the harsh assessment systems, so many firms is excluded.Asset securitization has developed as a financial innovation abroad for more than 30 years. It can provide useful help to solve their financing problems in China and it is an effective complement to broaden the financing channels. Under the strong support and promotion of government departments, in the end of 2005, special asset management plan is the first pilot projects as the major manifestations of enterprise asset securitization in China. It has great significance both on perfecting the financial markets and defusing corporate financing plight. While domestic enterprises are constantly explore the use of cross-border assets securitization for international cooperation. Along with the regulatory and relevant policy documents coming on, corporate asset securitization in China is constantly standardize and healthy development.This paper reviews the relevant research results at home and abroad from a point of view of asset securitization as a financing vehicle. After enterprise asset securitization concept is defined, and after the participator, process and the classification are introduced, this paper considers asset securitization is structured finance arrangements. Through analysis of advantages, we can clearly different the asset securitization from debt financing and equity financing. Enterprises issue asset-backed securities through the mechanism of "true sale", "bankruptcy isolation" and "credit enhancement" of receivable assets which lack the liquidity. It is an asset financing, not overall credit financing in the capital markets. Such financing method can enable companies to save financing costs, but also to reduce the cost of supervision and bankruptcy costs to increase enterprise value by utilizing non-current assets, increasing future cash flow and reducing the possibility of bankruptcy.Considering the status quo of the China Enterprise Asset Securitization market development and system construction, this paper focused on the existing problems and shortcomings of special asset management plans and cross-border asset securitization, and proposed improvement measures. Legal status fuzzy, not-standardized operations, accounting and tax system imperfection and other problems need to be solved in special asset management plan practice. Although cross-border asset securitization can avoid the current domestic system defects, it lacks the necessary government support. Prospecting the future, we need to focus on asset securitization legislation, clear legal relations and accounting and tax operations. At the same time we need to take measures to foster more investors, expand the scope of securitized assets and improve the liquidity of securities products; we need to perfect credit enhancement and credit rating; we need to actively promote cross-border asset securitization.