Quick Liquidity
Stock Loans
Introduction
- High Net Worth
- 'C' Class Executives
- Corporate Owners
- Real Estate Investors
- Industrialists
- Entrepreneurs
At Bond Financial, one of our primary thrusts in the World of Finance is that of Stock Loans.
A stock Loan is a financial instrument that uses corporate stock (stocks and shares) as its collateral. Such a loan can be a crucial source of discrete financing and they have many advantages over any normal Bank or Brokerage loan.
The dollar amount that can be loaned against a stock (the LTV) is strictly dependent on several factors, the prime ones are; The Quality of the security, its trading price, The Daily Trading volume and its volatility.
- A Stock Loan is strictly NON-RECOURSE. NO Personal guarantee is required.
- NO personal or business Tax Returns NO Credit Review
- NO Personal Income Criteria NO Business income criteria
- NO Business Plan required for project Funding Low fixed interest rates
- Borrow up to 70% of the Stock’s value Keep 100% of appreciation and dividends
- Use the funds for any purpose whatsoever:
- Expand or create a business operation
- Raise capital for any business purpose or need
- Put your grand children through college
- Buy that Dream Yacht or Corporate Aircraft
- Set up a trust or Endowment
- Take that long awaited World Cruise – the possibilities are endless…
Stock Loan Basics
- Borrow up to 70% of the Stock's value Keep 100% of appreciation and dividends
- Use the funds for any purpose whatsoever
A Stock Loan is a loan collateralized by shares of publicly traded stock, either domestic or foreign. It gives the borrower access to the liquidity of the assets without actually selling the stock. The term of the loan is typically from 2 to 5 years and the shares are returned upon repayment of the loan.
So, as you can see, a stock loan is just that, it is a loan; it is not a sale of your equities. If you need cash now, for whatever reason and you have a stock portfolio, you can tap into that portfolio and borrow up to 70% of its market price while still participating in some or all of the stocks rise in value. It’s a win-win situation that puts a floor on any losses while at the same time you retain your right to profit and growth. You are both in the market and out of the market simultaneously! You diversify your portfolio and keep the stockholder benefits.
It’s really a case of having your cake and eating it too!!
Do you want to leverage the present value of your securities for your immediate cash needs?
Do you find yourself struggling with how much of your portfolio should remain in stocks versus alternative investments, such as real estate, small business or lending?
What if you didn’t have to choose?
In addition to the many features of this program, you can extend your stock loan for a further agreed period of time.
In the loan agreement, the borrower acknowledges that the lender will use hedging strategies in order to protect the stock and its value.
The lending firm will create a fixed asset from a variable asset, access a line of credit and then lend cash to the borrower. They might insure the stock position and have a guaranteed buyer for a specific amount at a given period in the future.
In volatile markets such as we are currently experiencing, a stock loan allows the borrower the flexibility of letting your stock or mutual fund portfolio work for you but if the market rises and the price per share increases during the term of the loan, the borrower retains the upside potential. If, on the other hand, the price/value of the stock diminishes significantly, the borrower can weigh up the situation and walk away from the loan without any re-course whatsoever!
Bond Financial Group is pleased to announce the expansion of our Stock Loan program. We are now able to facilitate Stock Loans for a wide range of clients -Those with a High Net Worth, ‘C’ Class Executives Corporate owners, Real Estate Investors, Industrialists and Entrepreneurs.
We also work closely with CPA’s Financial Advisors, Wealth Management professionals and Stock Brokers to enhance the services they offer their clientele
Loan Examples
The below examples do not take into account any interest due and/or paid
You have $500,000 of stock and decide to obtain a Stock Loan.
You are issued funds for 65% of the current price, namely $325,000.
During the term of the loan the stock rises in value to $600,000, at the maturity of the loan you will repay the borrowed $400,000 and pocket the difference of the $100,000 gain.
You have $500,000 of stock and decide to obtain a Stock Loan.
You are issued funds for 65% of the current price, namely $325,000.
At the maturity of the loan, due to a market downturn the stock has dropped to $300,000. At this point you have received and benefited from $400,000, which is $100,000 more than its present price.
You can decide to pay the difference to reclaim your stock or you can relinquish it and walk away from the transaction without recourse.
Stock Loans vs. Stock Sales vs. Margin Loans
There are distinct benefits to a Stock Loan compared to an outright Stock Sale and to a margin Loan’
Stock Loans
- Non-Recourse-walk away with no liability if stock value drops below LVR.
- Up to 70% LTV.
- No margin calls, with total protection against stock volatility.
- Loan flexibility-use virtually any stock at any price point including penny stocks, restricted stocks and options.
- Benefit from stock growth during loan term-upside potential.
- Low, fixed rate loan.
- Privacy – in most cases there is no reporting, unless shares are restricted and subject to SEC or foreign regulations.
- Flexible – unlimited use of proceeds -except the purchase of marginable securities.
- Unlimited amount of funds available.
- Fast funding process and turnaround.
- Dividends credited towards repayment.
Stock Sales
- Taxable event.
- No future growth in stock available.
- SEC reported in case of restricted stock.
- Public knowledge of sales in some cases with officers and major stockholders.
- In the final analysis, Non-Recourse Stock loans are the superior option offering no immediate tax liability and no personal liability if the stock loses value and the borrower chooses to exercise the non-recourse provision of the loan. In addition, Non-Recourse Stock loans are underwritten against a great variety of stocks, at higher LTV percentages, with lower fixed interest rates and provide upside potential and downside protection against stock volatility.
Margin loans
- Nontaxable but full recourse loans.
- Subject to margin call if stock price falls-subject to stock volatility.
- 50% LTV maximum-government regulated. (most countries)
- Higher variable interest rates in most cases.
- Highly regulated use of proceeds.
- Accessibility of funds through “cash out” can be difficult
Frequently Asked Questions
Here are common questions we receive regarding the nature of a stock loan. Please contact our office should you have additional questions or need clarification on any answer below.
There are a variety of factors that determine the amount of funds you can borrow and these are strictly tied to the quality of the securities. Securities trading on the major Stock Exchanges around the world can realize LTV’s as high as 70%.
Pink Sheets and bulletin board securities will have a lower LTV’s due to price and volume requirements. Contact us to determine the appropriate LTV’s that your securities demand.
Yes, we can obtain a quote on a basket of securities. A basket of ‘like’ Securities will stabilize the LTV, conversely a basket of ‘unlike Securities will adversely affect the LTV.
Contact us for further details.
Securities are accepted from the major US and Foreign Exchanges. (Such as: ASX, JSE, LSE, AMEX, NASDAQ, NYSE). And from the smaller exchanges (OTC Pink Sheets and Bulletin Boards).
The minimum amount financed is US$50,000, there is no maximum. What are the eligibility criteria for Stock Loan?
This is determined on a case by case basis. But as a guide, the leading indicators when determining the eligibility of Stock as collateral are volatility, share price, trends, filings, short term trading volume, long term trading volume and hedging costs.
When providing a quote, we will give you details of how these factors relate to the securities that you present as collateral.
This is determined on a case by case basis. When determining the eligibility of a stock as collateral, the leading indicators are going to be optional securities with a good volume of trading, exchange, volatility, share price, trends, filings, short term trading volume, long term trading volume and hedging costs. When providing a quote, we will explain how these factors relate to your securities that are presented as collateral.
During the course of the loan, most stock loan companies use hedging strategies to protect the stock and its value. The hedging strategy is agreed upon in the loan terms: borrowers are aware of the strategy being used with their stocks. In the safest loans, the company insures the stock position and has a guaranteed buyer for the amount at a specific time in the future. Once the possession is insured, essentially a fixed asset has been created from a variable asset: from there the lender will access their line of credit, borrow cash against the fixed asset and give it to the borrower. Other hedging strategies can include staying long on the stock and actively trading the stock. Because the stock loan company generally uses a hedging strategy with the stock, many have fixed lengths. Depending on the strategy used, borrowers may not be able to prepay the loan.
Those who are allowed could face penalties. However, during a 3-year loan, it might be possible to repay the loan after 2 years.
** BUT, here is the interesting part of the equation, as the Stock Loan is a fully NON RECOURSE loan if the stock drops, the borrower is not responsible for coming up with the difference in value. The borrower can walk away from the loan obligation at ANY TIME after the funds have been received …without any recourse damage to their credit or retribution from the stock loan company.
The speed of the transaction depends on a variety of factors. Once all the agreements are in place and shares have been transferred, the loan will typically fund in 24-36 hours for US Securities. However, for foreign securities more time may be required due to currency conversion, hedging structures and foreign based facilitators.
There are no hidden fees associated with the Stock loans we arrange. Much like a mortgage loan, there are points charged as a fee for services, which will always be fully disclosed from the outset. Most importantly, there are never any upfront fees or out of pocket costs.
Are there any restrictions on the use of the proceeds?
There are no restrictions on the use of the loan proceeds, other than they may not be used for the purchase of marginable securities.
Ask us about the advantages of using the proceeds from a Stock Loan versus using cash.
No, the money raised from a Stock Loan can be used for any purpose other than to purchase marginable securities.
As stated, there are no margin calls and the loans are non-recourse. (**See notation above)
To apply for a stock loan, please go to the ‘contact us‘ tab. Please have the Stock Symbol, number of share held and the amount you would like to borrow.
As an expert in the field of finance, particularly in Stock Loans, I'd like to delve into the concepts mentioned in the article to provide a comprehensive understanding of this financial instrument.
Introduction to Stock Loans: At Bond Financial, Stock Loans play a pivotal role as a financial instrument that utilizes corporate stock (stocks and shares) as collateral. These loans offer discreet financing with several advantages over traditional bank or brokerage loans.
Key Factors Affecting Loan Amount: The dollar amount loaned against a stock, known as Loan-to-Value (LTV), is determined by factors such as the quality of the security, trading price, daily trading volume, and volatility of the stock.
Benefits of Stock Loans:
- Non-recourse nature: No personal guarantee, no personal or business tax returns, and no credit review.
- Borrow up to 70% of the stock's value.
- Low fixed interest rates.
- Keep 100% of appreciation and dividends.
- Flexible use of funds for various purposes.
Stock Loan Basics: A Stock Loan is collateralized by shares of publicly traded stock, allowing borrowers to access liquidity without selling the stock. The loan term is typically 2 to 5 years, and shares are returned upon repayment.
Exploring Further: Stock Loans offer a unique advantage of leveraging the present value of securities for immediate cash needs, allowing borrowers to diversify their portfolios and retain stockholder benefits.
Loan Extension and Hedging Strategies: The loan agreement acknowledges the use of hedging strategies to protect stock value. The lending firm may create a fixed asset from a variable one, access a line of credit, insure the stock position, and provide cash to the borrower.
Clientele and Loan Examples: Bond Financial Group extends Stock Loans to various clients, including those with high net worth, 'C' class executives, corporate owners, real estate investors, industrialists, and entrepreneurs. Examples illustrate how borrowers can benefit from stock appreciation or mitigate losses.
Stock Loans vs. Stock Sales vs. Margin Loans: A comparison highlights the benefits of Stock Loans, including non-recourse nature, high LTV, protection against stock volatility, low fixed interest rates, and privacy.
Frequently Asked Questions: Answers to common questions address factors like borrowing limits, eligibility criteria, types of securities accepted, pledged stock management, loan closure speed, hidden costs, and usage restrictions.
Application Process: To apply for a Stock Loan, individuals need to provide details such as the stock symbol, number of shares held, and the desired loan amount.
In conclusion, Stock Loans offer a compelling financial option for those looking to leverage their stock portfolios while enjoying flexibility, low risk, and various financial benefits. If you have any specific questions or require further clarification on Stock Loans, feel free to reach out.
