Large corporations often need to create smaller business entities, typically as special purpose vehicles (SPVs) with specific intended applications. This is a burdensome and time-consuming process, but automation can help expedite and simplify things.
Recently, my business has needed to create SPVs for raising capital and other various purposes. This has also been an effective way to accomplish certain deal structures. For example, when my business was acquiring a company, an SPV was created specifically to be the funding partner and manage that company. At the same time, this shielded my business from certain risks. It’s a fairly simple process that I believe all entrepreneurs should understand to know when to use these entities.
Below is a straightforward guide on how to use SPVs and how to efficiently create them.
Business Entities And The Need For Special Purpose Vehicles (SPV)
A special purpose vehicle (SPV) is a specific kind of business entity created to accomplish some niche goal for a parent business. For example, a major company might create a smaller SPV as a way of isolating risk, limiting liability and assigning it to a legally different entity. You could also create an SPV for asset securitization purposes, raising capital, project financing, or for tax optimization.
Most small to mid-sized businesses aren’t going to need to create even a single SPV. But among larger corporations, SPV creation is typically much more important, and some larger entities create dozens to hundreds of SPVs.
The Power Of Automation
If you need to create more than an occasional SPV, you’ll strongly benefit from technologies designed to facilitate faster SPV creation. While full automation isn’t possible for every part of the process, many of the tedious and repetitive steps that could otherwise bog down your work can be sufficiently automated.
Using the right SPV creation automation tools will save you time, allowing you to focus on more important matters. Moreover, while SPV creation isn’t always cheap, automation often makes the process significantly less expensive.
Beyond the time and cost savings, automation offers other less-obvious benefits as well. For example, automation improves the consistency of your SPV creation process. An SPV is an instrument to limit liability and reduce risk, but these benefits are only truly realized when SPVs can be created consistently and reliably—something automation facilitates. SPV creation automation also improves transparency and tracking, making it easier to keep tabs on all your SPVs.
Tips For Employing Automation To Create Business Entities
If you’re going to use automation to create SPVs or other business entities, here are a few important strategies to follow:
Create An Overarching Plan.
First, you should have some kind of overarching plan in place. While SPV automation can help you skip many steps and save time, it’s essential to have a clear formula for how these tools will support your high-level processes in achieving your big picture goals. Otherwise, you risk losing efficiency—and possibly your direction. Make sure you know exactly what you want to get out of your SPV creation plans and how to integrate your automation tools into your overall work process.
Establish Essential Roles.
Automation is going to take a lot of work off your plate, but you’ll still need to have a competent team of leaders in charge of SPV creation and oversight. Establish essential roles in this area so there are always responsible people to step in when necessary.
Do Your Due Diligence With Respect To Tools.
You likely already use a host of automation tools in your business. SPV creation is an arguably more important and sensitive matter, so you’ll need to exercise additional due diligence with respect to the tools you use for this purpose. Analyze and test a variety of SPV automation and creation tools, investigate the developers, and choose the best fit for your business needs.
Document Your Process.
You can’t automate SPV creation until you have a documented process for it. Create a formula that can apply to all your new SPVs and find a way to integrate it into your automation tool.
Educate Your Users.
If you’re going to have multiple people automating and working on SPV creation, make sure to educate your users. An automation tool is only as effective and reliable as the people overseeing it.
Design A Backup Plan.
What happens if your SPV automation tool is no longer available or is currently down? It’s a good idea to have some kind of backup plan in place.
Master The Art Of Tracking.
Tracking and transparency are critical when it comes to SPV automation, so make sure your process includes detailed records.
Consider Integrations.
You may also want to consider high-level software integrations to further streamline your workflow. For example, you might be able to integrate your SPV creation into your enterprise resource management (ERM) platform.
If you’re going to create multiple SPVs for your business, you should strongly consider integrating some form of automation to accelerate the process and minimize the risk of error. While SPV automation isn’t complete, nor is it perfect, it can significantly ease the workload on your organization and help you achieve your SPV-centric goals.
Automation may not be a one-size-fits-all solution to every challenge in SPV creation, but it can drastically reduce the common difficulties businesses face when creating an SPV. When done correctly, it also optimizes the time-consuming process by providing structure and consistency. As SPVs become more central to sophisticated deal-making and risk management strategies, integrating the appropriate automation tools with the right approach is becoming less of a luxury and more of a strategic necessity.
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