Securities-Based Lending
A simple, proven and secure process to obtain funding for any purpose.
This
is a specialized process, so please review the entire site in order to
best understand how it works and how you can benefit from it.
This lending platform allows the borrower to pledge their securities (stocks, mutual funds, bonds, MTN's, T-Notes or other securities) to obtain funds for personal or business use. Using securities as collateral it is possible to borrow money at a fixed interest rate that is below 4.50% for up to 10 years.
We work with an international private direct lender that offers the most straightforward, personal and customized solutions to borrowers in need of prompt financing. In recent years, they have executed hundreds of successful securities-based lending transactions world-wide, lending millions of dollars in the U.S. and abroad. Their proven and efficient process streamlines loan paperwork for a rapid and trouble-free experience.
We are supported by a national network of established, knowledgeable
loan professionals and other expert financial, legal, and research
support personnel to provide a
simple financing solution to meet your immediate and future needs.
Product Highlights
• Securities information is provided from the borrower.
(A recent monthly statement works best.)
• The loan-to-value ratio and the interest rate are determined by what
securities are pledged.
The more liquid and actively the traded securities are, the higher the
loan-to-value ratio and the lower the interest rate.
• A Term Sheet/Loan Commitment is then issued.
• Borrower reviews and approves the Term Sheet/Loan Commitment.
• A conference call is placed between the borrower and lender to answer
any questions.
• The Pledge Agreement and Contract are forwarded to the borrower for
signatures.
• The securities are then transferred to the lender's brokerage account.
• Lender tracks the closing price of the shares for 3 days to obtain an
average price.
• The loan is then disbursed based upon the loan-to-value previously
agreed upon.
• Borrower makes Interest-Only quarterly payments.
• During the loan term prepayment of the loan is not allowed.
• Any dividends from the securities is credited to the quarterly
interest-only loan payment first and any excess is returned to the
borrower.
• Default trigger is set at 80% of the loan amount not 80% of the
securities value like typical margin loans.
For example: securities value of $1MM, loan of $800k, default trigger at
$640k (80% of the loan amount).
If the securities value fell below $640k the borrower could walk away
from the obligation of repayment of the loan and keep the original loan
proceeds ($800k) or contribute cash or securities to bring the value
back up to $640k.
The borrower would forfeit the collateral. Unlike margin loans this is a
non-recourse loan so there is no personal liability should a default on
the loan occur.
• At the end of the loan term the loan is paid in full and the same
amount of shares originally pledged are returned to the borrower.
• The loan may also be extended or refinanced.
The time frame for funding may be as little as 5-7 days.
Simple Steps•
Once Contacted by Securities Based Lending Expert, Complete the Express
Quote Form providing your preferred contact information, listing the
names of securities and their
stock symbol along with the number of shares
• Upon receipt, a loan proposal will be quickly drawn up to determine
loan
amount and interest rate
• A Term Sheet (Loan Commitment) is issued and if the terms are
acceptable then
the Pledge and Loan Agreement are forwarded for signatures
• A conference call is placed with the borrower to answer any questions
and to
insure the borrower understands the complete loan transaction
• Arrangements are made for the quick transfer of the securities
•
Values will be verified and within days loan proceeds are transferred
into
the borrower's bank account.
• At the end of the loan term the
borrower may renew the loan, possibly refinance, or pay off the loan.
Upon
repayment of the loan the same securities originally pledged are
returned to the borrower.
It's that simple!
More Information
The more informed you are about the lending process, the greater likelihood that we can successfully create a tailored solution to fit your funding needs.
What to Avoid When
Choosing a Securities-Based Loan
High LTV
Avoid unrealistically high loan-to-value ratios. In our experience, the
closer the LTV approaches 100 percent of the total asset value, the less
likely it is that the lender will be capable of hedging the position
and generating sufficient capital in order to return the securities at
the
end of the loan term.
Full Recourse Loans
Additional liability, fees, and penalties may be
assessed.
Short Loan Term
Be cautious of loan terms that are less than three years, especially
when the LTV is higher than 75 percent. That’s because there is
insufficient time for the lender to leverage pledged collateral
conservatively in a financially profitable and sound manner for all
concerned.
High Interest Rate
Certain lenders may offer a loan with no interest payments during the
life of the loan. However, the interest is usually compounded and set at
a higher rate and then becomes due in full upon loan termination. In
this case, the “true” cost of funds may be hidden (either intentionally
or unintentionally) from the borrower until the loan term ends and the
borrower discovers that he or she owes significantly more than the
actual loan value.
Poor Documentation and Communication
You should get detailed documentation and timely notification of
interest payments due. A legitimate lender will also notify you promptly
if your loan goes into default because of a significant decrease in
collateral value. However, it should notify you how to “cure” your
default and keep the loan current and viable.
What cannot be used as collateral:
• 401(k)'s, IRA's or any restricted retirement fund
• Money Market Accounts*
• CD's*
• Annuities
• Gold or silver mines
• Commodities
• CMO's
• SBLC's
• Bank Guarantees or Warranties
• Private Notes or private Bonds
• Bonds that are coming due within 3 years
• Bearer Bonds
*can be converted to cash then securities may be purchased and used as
collateral.
Minimum loan
amount is $100,000
Minimum loan term is 3 years
Minimum average trading activity on stocks must be $50,000 per day.
(Average volume x current share price.)
Borrower must
have proof of ownership of the securities.
We do not ask for credit history, income, employment or the intended use
of the funds.
