A number of larger banks have started using a new structure, a "special-purpose entity," (SPE) which is designed to acquire trade receivables and commercial loans from high-quality (often investment-grade) obligors and to fund those loans by issuing (asset-backed) commercial paper that is to be repaid from the cash flow of the receivables. Capital is contributed to the SPE by the originating bank which, together with the high quality of the underlying borrowers, is sufficient to allow the SPE to receive a high credit rating. The net result is that the SPE’s cost of funding can be at or below that of the originating bank itself. The SPE is "owned" by individuals who are not formally affiliated with the bank, although the degree of separation is typically minimal. These securitization programs enable banks to arrange short-term financing support for their customers without having to extend credit directly. This structure provides borrowers with an alternative source of funding and allows banks to earn fee income for managing the programs. As the asset-backed commercial paper structure has developed, it has been used to finance a wide variety of underlying loans--in some cases, loans purchased from other firms rather than originated by the bank itself--and as a "remote origination" vehicle from which loans can be made directly. Like other securitization techniques, this structure allows banks to meet their customers’ credit needs while incurring lower capital requirements and a smaller balance-sheet than if it had made the loans directly. Asset-backed commercial paper programs typically have several layers of credit enhancement cushioning the commercial paper purchaser from potential loss. (Federal Reserve-Trading and Capital-Markets Activities Manual)