Structured finance deals are complex. They require expertise in capital markets and structural underwriting to be successful. A structured deal is one where the investor gets a minimum assured return and any downside risk from a fall in earnings is protected. Structured finance deals often involve the use of financial instruments that are not ordinarily marketable, such as Sale-Leaseback.

Structured finance takes the underlying risk out of a corporate deal and allows for a measure of investor protection without killing the return on the investment. In today’s complex business environment, structured finance is essential if investors want to receive their initial investment, receive interest payments and a principal repayment – while at all times protecting themselves from significant loss.

There are two basic types of structured deals: capital restructuring and risk mitigation. Capital restructuring structures work to provide a company with the resources it needs to ensure long-term survival and growth. Risk mitigation structures are those that aim to reduce risk related to factors such as earnings potential or nonconvertible debts.

Structured Finance deals protect the investment from losses arising from asset price declines or operational problems by sharing risk through credit derivatives. Structured finance is a method for shifting the risks of any income producing property to an investor in a more manageable way. In this way, the borrower can continue to operate his own business and receive interest payments during economic downturns without worrying about loan defaults or disrupted cash flows. The benefit to the investor is relative stability and a constant if sometimes small income stream.