A Selection of Frequently Asked Questions

How can I be sure of getting the best possible rate for my portfolio?

We enjoy established and close relationships with a range of major U.S. financial firms and advisors all of whom specialize in areas specific to our industry. These relationships typically give us an inside track and therefore the opportunity to go to work for our clients and return with rates and terms superior to what any individual investor is likely to obtain on their own unless they had significant long-term depository relationships and the insight and knowledge of the industry we've developed over many years in this business. We also have access to advisors and specialists to guide us to licensed and regulated resources with the features our clients require.

Regardless of your portfolio size whether 50K or $250MM, our goal is to deliver the best possible securities-based loan terms to our clients regardless of size or circumstance for every qualified portfolios.

If you already have a written securities-based loan quote in hand, you'd be wise to send the portfolio and quote over to us before you sign on the dotted line. We'll bend over backwards to beat it.

How does this differ from a margin loan?

A securities-based line of credit and a margin loan differ in many respects:

Advance Rates (Funds): Our Line of Credit provides loan-to-value from between 65% and 99% depending on the size of the portfolio and the quality of securities involved. Margin loans by definition cannot exceed 50% of current value. (Note, however, that the proceeds of a margin loan can be used to purchase more shares of stock; the proceeds of your line of credit cannot be used to purchase marginable securities under U.S. regulation).

Constant Interest Rates: Your interest rate does not change with the amount of your drawdown. No matter the size of your withdrawal, the rate remains the same once your contract has been approved and signed. Margin loans typically charge higher interest the less you receive.

Constancy in Value: Securities fluctuate in value, but if you have a securities-backed line of credit in good standing, you will be able to access the same amount of cash that has been authorized from the start provided that your account has maintained its value. A margin loan can fluctuate in value day to day.

Margin Call Advantages: A margin loan typically can be called at any time the underlying shares drop in value below approx. 20% or so. This securities-based line of credit is callable only when the amount of credit you have drawn is less than the value of your collateral account. Remember too: You are not required to draw the entire amount of your credit line allotment. You are permitted to draw less at any time and owe no interest until you choose to draw.

The ABN service offers still one more significant different: Personalized attention. We have a stake in seeing that our clients receive the very best possible terms, not just the terms offered by one company.

What if my account is already margined, and I owe money to my brokerage?

Not a problem. If your portfolio otherwise qualifies, we can arrange to pay off your margin in advance.

Can I mix real estate with my securities to create a "hybrid credit line."?

Yes. You can add most any liquid asset into the mix to produce the best possible rate. For example, you may have mutual funds, some stocks, perhaps some government Treasurys, and a piece of property with a high-interest loan on it. You could contact A. B. Nicholas to deliver a quote where your shares are not sold, and where your property is paid down or owned free and clear. Your debt then might shift instead to the repayment of your credit line -- where no principal is due unless you want to "refill" your line a some point in the future. Your monthly, low adjustable or fixed-rate (slightly higher) credit line interest payment would maintain the status of your line. Ask us about a "hybrid" and we'll be happy to assist.

Is ABN a securities dealer?

No, we are a securities finance service provider. We leverage our relationships into superior terms and provide access to superior rates for institutionally managed loans through top-tier, household name partner firms that allow us us to pull forth the very best rates and terms in the market for our clients. We offer no securities buy-sell advisory services nor any kind of investment advice, financial planning, insurance, or tax advice. We specialize in this field alone.

If you are in need of securities brokering services, tax advice, financial planning advice, personal financial planning, or any other type of financial guidance, we strongly recommend that you locate a licensed advisor for those services residing in your jurisdiction.

Can a corporation or trust be a signatory and legal borrower?

Yes. All of our programs allow a corporation or a trust to be the legally valid signatory/borrower.

Is this different from a "nonrecourse stock loan" and if so, how?

(NOTE: Please read our "Homework" section here for more information on why financial consumers should think very carefully before plunging into a nonrecourse stock loan -- and any form of securities loan that requires you to hand over title to the lender beforehand, given recent court and regulatory rulings classifying such loans as taxable sales.)

Pay for What You Use: For any of the programs we work with, if you do not draw down your securities-based credit line, you do not pay any interest. Interest is due only on what you choose to draw down. With all other loans, including nonrecourse stock loans, you will pay interest from the start.

Security: Giving your shares' title to a private lender in today's market is considered by most experts to be a very risky proposition, but keeping your shares in an SIPC-member brokerage, in your own account and title, with a loan or credit line via cash from an FDIC-insured U.S. financial institution means you have the same level of security as any stock owner or depositor in any major U.S. bank.

Prepayment Freedom. Most nonrecourse stock loans come with set terms and varying penalties for repayment. This is because most involve the direct sale of your securities to fund your loan. This is also why the IRS and Tax Courts have come to treat all transfer-of-title stock loans as taxable sales from the start.

Our securities-based line of credit, on the other hand, can be paid off at any time and exited without any penalty whatsoever. When paid, it can be reused again. If you opt for our fixed-rate line, you can still exit at any time, but depending on when you exit, a small (negotiable) interest penalty may apply. Inquire for more information.

What is the maximum loan-to-value for which I am eligible?

For stocks, you can expect a maximum of between 60%-96%, with best rates for the largest portfolios of high quality securities. For government securities, this figure is 99%. Please consult our "What We'll Take" page for more information. As a general rule, individuals who have submitted a valid brokerage statement can expect a precise quote within 24 hours. (Request a quote here)

What is the lowest interest rate I can expect?

For larger portfolios (above $2M) rates are currently in the neighborhood of 1.5% for credit lines. At the upper end, rates are approximately 5% for the smallest portfolios (around $50K), with fixed rate conventional loans (not credit lines) somewhat higher. Please check here for the latest rate matrix.

What about loan to value (LTV)?

We provide the highest LTV In the industry for most securities. If your portfolio comes in at over $5M in initial value and the underlying securities have prices of no less than US$10 or more in USD equivalent, we can offer the best rates bar none, and can beat any verified written offer by any other lender.

Please check here for our "What We'll Take" LTV matrix.

Are my securities sold at any time?

Absolutely not. Your shares reside in your own account, in your own title, subject to your orders and actions as with your current brokerage account. Your only restriction is that you must maintain value in the account with marginable securities equivalent to the value of the amount of cash principal you have drawn down. If you draw down less than your allotment, you may charge less as well.

What are my repayment options?

Your repayment can be either quarterly or monthly on an annualized interest-only basis depending on the final loan structure you choose. Principal on the variable (floating) rate credit line can be repaid at any time provided interest payments are current. Fixed-rate loans have set maturity dates and principal must be repaid in full at maturity; however, the loan may be rolled over into a new loan contract after a review of the securities at that juncture. Excellent custom structures are standard, and we have multiple custom resources to draw from.

I am opening at new account at my lender brokerage. Why?

This is to help ensure your lender's interest in the collateral. With everything the lender is providing the borrower, this should be understood as very reasonable.

Whatever the reputation of your current brokerage, you should not have any concern over opening your account at a top-tier, household name brokerage of the kinds that we have partnered with. In fact, chances are good that you'll get better services than you are currently experiencing.

Your new account allows you to trade, just like your current account. Your new account is in your (or your company's, if you prefer) name alone, just like your current account. Your new account lets you trade at optimum rates, again just as your current brokerage account presumably does. One can go down the line: Your new account is SIPC-insured; your new account ensures that all dividends go directly to you; your new account comes with 24/7 online, phone, and in-person access and records. Many other "bells and whistles" come with your new account.

How long must I wait to get access to my funds?

Within 48-72 hours of receipt of shares in your account, your credit line is normally available for wire or in-person transfer or check. As the signatory, you can move on the process as slowly or as quickly as you wish. Much depends, therefore, on you.

The key step is to move your shares to your new account at your lending brokerage, and this can be done with a simple ACAT "call" from your new lending brokerage to your existing brokerage, with your consent. Shares through this process move quietly at your instruction to your new account without the need to interface with your existing brokerage or advisor.

You are also free to use your stock certificates, and we can convert them to electronic format in as little as a day. Portfolio review and quote can be achieved often within hours by simply faxing back an account opening statement.

Once the shares have arrived, your credit line agreement will be provided via your lending institution promptly and once signed, you may begin immediately drawing from your line. The total process can take from as few as two days to as many as seven, on average, depending on the speed with which you choose to act. These are processing days, and unlike most nonrecourse transfer-of-title loans where the delay is to allow them to be sold into the market, your shares never move and are never sold unless you yourself choose to sell them.

How do I access my loan funds?

You may have your cash wired for all programs; You may access and transfer via phone or in person; or you may use the bank card that will be provided to you at account opening.

What fees does ABN charge for its services?

Our fees are the lowest in the industry. If you should have a written offer for lower fees, we invite you to show us that offer and we will beat it. At no time are more than three points charged on any of our financing programs.

Our focus is on our clients first and foremost. We charge a reasonable fee based on your gross credit line authorization or loan amount (in the case of fixed-rate loans) that is paid by you to ABN only upon successful opening of your credit line or loan.

Are dividends paid and credited?

Yes, your dividends are paid directly to you like any dividends for any securities in a modern U.S. licensed brokerage facility. You also retain full voting rights. Other than the lender lien, all normal features and rights pursuant to your shares remain just as they do now. (Note that you may receive permission to trade in the account in some cases, or to swap out one set of securities for another to sustain the credit line).

Do I receive account statements?

Yes, as this is a normal brokerage and banking relationship subject to the same regulations and policies of any U.S. financial firm. That means you can choose to receive your statements either by logging into your account at your brokerage and printing them; receiving them by mail; or printing them directly from our online account.

More Questions?
Write support@abnicholas.com or Call us at (202) 379-4744