To create immediate cash flow and reinvest in new loans
The most common reason for selling debt is to create immediate cash flow. It’s a great way to monetize nonperforming assets and create a reliable cash flow (in the form of a forward flow) in a relatively short period of time. Consumer accounts that are older can be difficult to collect and selling these non-performing assets can remove financial burden on the creditor. Creditors can also put the proceeds from liquidation immediately back into the business in the form of new loans or other business needs. This ability to instantly reinvest sale proceeds back into high yielding loans is what can enable smaller creditors to scale.