An advance rate in
securitization is the percentage of the value of the
collateral that a securitization issuer is willing to lend to a
borrower. The advance rate is used to determine the maximum loan amount that a borrower can receive from a securitization. For example, if a securitisation issuer is willing to lend up to 80% of the value of the collateral, then a borrower with collateral worth $100,000 could receive a loan of up to $80,000.
The advance rate is determined by a number of factors, including the type of collateral, the creditworthiness of the borrower, and the interest rates in the market. A higher advance rate means that the borrower can borrow more money, but it also means that the securitization issuer is taking on more risk.
A lower advance rate means that the borrower can borrow less money, but it also means that the securitisation issuer is taking on less risk. The advance rate is an important factor in securitization because it affects the amount of money that the securitization issuer can raise and the amount of risk that the securitization issuer is taking on.