Navigating the Build vs. Buy Decision in Managing Asset-Backed Financing

Written by Bart Steenbergen, Head of Capital Markets

In one of the largest and most liquid debt markets in the world, the U.S. asset-backed market moves trillions of dollars daily, predominantly managed through tools as basic as Excel and email. This raises a fundamental question for companies dependent on debt capital: Is the traditional way sufficient for the zero-defect demands of today’s capital markets?

The Cost of Complexity

Building internal systems to manage capital markets and the required reporting is not a one-and-done task. Companies that choose to build these solutions internally find that allocating the necessary engineering and technology resources to launch, maintain, and customize required back-office solutions is crowded out by initiatives that are deemed more mission critical. As a result, the process remains error prone and singular in focus which hampers growth and does not reduce risk.

The Strategic Imperative

One thing all borrowers and lenders agree on: continued access to the best source of capital is dependent on an error free reporting process.  As balance sheets grow, the complexity of managing multiple warehouses, securitizations, and future flow contracts increases exponentially.  Adding human resources to tackle this complexity is not scalable and will increase the likelihood of errors. Utilizing purpose built software allows borrowers and lenders to reliably build their platforms and make long term decisions.

Evaluating Build vs. Buy

This decision encompasses not only current workflows involving assets and debt but should also anticipate future needs. Companies must assess their core competencies: Is your focus to become a market leader in your particular market, such as asset management or consumer lending? If so, diverting critical in-house engineering resources to manage  complex financing work streams is not the best strategic use of talent.

Partnering with specialized tech providers offers significant advantages. These partners bring continual innovation and deep market knowledge that streamline complex asset-backed lending processes. A robust external platform offers scalable, cost-effective solutions without the need for extensive client-side engineering resources, while adapting to evolving market conditions and regulatory standards to keep operations efficient and competitive.

Making the Informed Choice

The decision between building in-house solutions and purchasing external technology is pivotal. It requires a strategic assessment of your company’s long-term goals, core competencies, and the operational complexities of the asset-backed market. By making an informed choice, companies can ensure that they not only meet the rigorous demands of today’s capital markets but also position themselves for long-term sustainable growth and success.

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