WHAT IS A SECURITIES-BASED LENDING: STOCK LOAN?
The process of providing loans using securities as collateral is known as securities-based lending (SBL). Securities-based Lending gives quick access to funds for nearly any purpose, including real estate purchases, diamond purchases, and sports car purchases, as well as company investments.
Different Borrowers and/or Lenders in different countries call securities-based Lending, Stock Loan, Stock-Backed Loan, Stock-Based Loan, Securities-Backed Loan, Securities-Based Loan, Securities-Based Loan, Securities-Based Loan, Securities-Collateralized Lending, Stock-Backed Borrowing, Securities-Based Borrowing, etc.
TAKEAWAYS IMPORTANT
Securities-based lending gives funds to customers who want to acquire real estate, personal goods, or start a company.
These loans are often given to high-net-worth individuals or shareholders of publicly traded companies.
After the borrower puts their securities into a specific account – the Custodian A/C – handled by a third-party Custodian Bank and/or Securities Firm, the lender becomes a lienholder.
Borrowers get quicker access to financing, reduced interest rates, and more repayment flexibility, as well as the ability to postpone selling their stocks.
STOCK LOAN UNDERSTANDING: SECURITIES-BASED LENDING
Securities-based lending, which is generally accessible via big financial institutions and private banks, is mostly available to persons who have a substantial amount of money and capital. If you want to make a major company acquisition or conduct large transactions like real estate acquisitions, you should look for securities-based financing. These loans may also be used to pay for taxes, trips, or luxury items.
Here’s how it all goes down. The value of a loan is determined by the borrower’s investment portfolio. The issuer of the loan may assess eligibility based on the underlying asset in specific situations. It may decide to approve a loan depending on the stock’s market value and liquidity. The borrower’s assets (stocks) – the collateral – are put into a custodian account with a third-party custodian bank and/or securities business after the loan has been granted. On that account, the lender becomes a lienholder. If the borrower fails, the lender has the option to seize and sell the securities in order to recuperate their losses.
Borrowers may often obtain cash in a few days. Interest rates are normally two to five percentage points higher than LIBOR, based on the total value and liquidity of the borrower’s assets (stocks) as well as the market capitalization of the stock business.
Securities-based lending, also known as no-purpose lending or securities-based borrowing, has been a key growth sector for investment banks since the global financial crisis (GFC). Indeed, since 2011, the sustained increase in stocks and record-low interest rates has aided the growth of securities-based lending accounts and balances. Because it is faster to secure and needs significantly less paperwork than a typical loan, this kind of credit is popular.
STOCK LOAN BENEFITS: SECURITIES-BASED LENDING
Borrowers gain from securities-based lending in a variety of ways. It eliminates the need to sell securities, avoiding a taxable event for the investor and ensuring the investor’s investment plan remains intact.
As previously said, SBL provides cash in a matter of days at a cheaper interest rate with a wide range of repayment options. Home equity lines of credit (HELOCs) and second mortgages have substantially higher interest rates. SBLs are best utilized for short periods of time in instances when a large sum of money is needed immediately, such as an emergency or a bridging loan.
SBL also offers the lender a variety of advantages. It provides a new and attractive source of income with no added risk. The liquidity of the assets used as collateral, as well as existing relationships—with HWNIs and/or shareholders of publicly traded companies that utilize the SBL facility—mitigate most of the credit risk associated with conventional lending.
LOAN AMOUNT
Our credit size ranges from $1 million to $1 billion and more.
LTV SELECTION
LTV stands for loan-to-value ratio.
Stock Loan LTV Ratio = Stock Loan Lending Amount / Market Value of Stock Collateral
Our LTV is in the region of 40% to 70%.
OUR ANNUAL INTEREST RATE SCHEDULE
From 2.95 percent to 5%
THE LOAN MATURITY DATE IS OUR LENDING TERM.
Between 2 and 5 years
ADDITIONAL COLLATERAL OPTIONS:
Other Optional Collateral that a borrower may utilize with us for a loan (collateral lending deal) might include Bonds, Notes, Warrants, Bitcoins(or ETH, LTC, XPR), Mutual Fund, Real Estate(HK, US, CA, Profitable RE assets are a top option), Aircraft, Jet, Plane, Yacht, and so on.
