For any auto finance company, capital is the lifeblood. And the capital markets are the ultimate source of funding for most auto finance ventures.
When working with — or wanting to work with — the capital markets, it is important to understand what each “customer” in the capital markets wants and needs.
Below is a handy chart, courtesy of Daniel Parry, founder of Praxis Finance, that spells out the various capital markets players, what they do, and what they want from auto finance companies. By “sensitivity,” Parry means how “sensitive” are they to the financial and operational status of an auto finance company.
|Equity||Seed & Haircut Capital||High||Investment Committee|
|Short Term Debt||Mezzanine and Warehouse Debt||Moderate||Credit Committee|
|Long Term Debt||ABS Bonds||Moderate||Credit Committee|
|Rating Agencies||Oversight and evaluation||Moderate||Credit Committee|
|Regulators||Consumer and Market Protection||Very high||WashingtonPublic|