What are the advantages of your securities-based line of credit?

We offer:

1) Institutional security in an SIPC-insured account;

2) Advance rates from 70 up to 95%

3) Securities that remain in your own account and title;

4) A line of credit that puts payoff control in your hands;

5) Lowest interest in the industry, as of this writing (7/25/10) at 1.61% for a variable rate line; and

6) Instant cash for any investment* or other cash need - with interest-only terms, and no terminal point as long as you maintain your securities collateral. (*Cannot be invested into securities per Federal Reserve Board regulations).

You can get a direct institutional securities-based line of credit from
some institutions. However, normally the advance rate (loan amount) is
at or around 50% against the collateral while we can offer up to 95%
with all of the same security, reporting, and access that you've come to
expect from a major financial institution because your securities credit
line is managed by one of several top-tier financial institutions with which we work to implement this financing. That means low-interest, lots of flexibility, but much more cash available to you when you need it.
You can obtain a securities-based line of credit even when there's no immediate need so as to be ready to act fast when opportunity occurs.

Please tell me more about institutional stock loans and securities lending vs private placement transfer-of-title stock loans and securities lending.

When you give up title to your stocks, you are giving up legal ownership of your assets in every way except through the lender's contract (what is sometimes called "beneficial ownership.)" This means that the status of your relationship to your asset, in effect, boils down to the contract alone.

The health of one's lending institution is always important, but when the contract is the core of your relationship to your assets, then the financial health and stability of the lender becomes particularly critical. The likelihood of your receiving your shares back upon repayment is governed entirely by the capital standing and abilities of the private placement lender, rather than the rules, regulations or guarantees provided through institutional lenders subject to agencies such the SIPC. As a private loan transaction, these are issues that need to be considered.

Institutionally managed securities-based loans, by contrast (such as those offered through our company) are structured on the same principles as any common brokerage or banking loan, that is, with a simple lien on the asset until the loan is repaid. Shares do not change title except if the collateral is surrendered in the event of an uncured default. Unlike transfer-of-title loans, there is no "beneficial ownership", only actual, outright ownership that remains with the borrower. Rather than a private placement loan operating in a relatively unregulated space, your loans are underwritten by a fully regulated U.S. institution with the personal attention of licensed advisors.

There are conventional institutional loans - what we normally refer to as margin loans - and there are structured loan programs. For Securities Finance, our structured program is built as an enhanced loan facility which enables financing with far better features than those typically available through banks or brokerages. This means higher loan-to-value, low rates, more customized structures, and a far broader range of eligible securities.

With our institutional program the shares are not sold to fund the loan in any manner. Instead, funding is direct and in cash via a simple deposit to borrower's account. That is not the case with many transfer-of-title loan programs, where some degree of share selling may be required to fund the loans and a client may be told they will receive their loan funds over several weeks if a portion of the shares are sold into the market gradually.

Disclosure is never an issue with institutional securities loans. These issues are governed by state and federal law, whereas private placement lenders operate in a relatively unregulated space even today.

That also means the same client rights and lender accountability that any client of any U.S. bank or brokerage has under the law. It means public, open, easily available facts on your lending institution; and loan funds deposited directly into your account with no complicated transfer issues or delays.

Transfer of Title to a private third party or retention of your shares in a top-tier brokerage in your own account and title? Private placement loan in an unregulated environment, or institutional loan in a secure, fully licensed space? The choice will of course be entirely yours to make but we counsel caution and good due diligence regardless of choice.

But I need to pass credit checks and supply a long personal financial statement and other paperwork, to obtain one of your loans, correct?

No. Actually, quite the opposite is true. These are "Limited-Doc" loans - that is, your income and your assets do not determine the terms of your loan offer or whether you will receive the loan at all. If you have eligible securities, a custom loan term sheet will be offered (often with great flexibility). Other than a "soft credit check" - a check to make sure you aren't currently bankruptcy and have no tax liens, divorce liens, or defaults-- your loan is almost certain to be approved.
 

Will we need a large portfolio of securities to participate in this loan program? Do I need multiple securities in my portfolio?

No. Portfolio's as small as $150,000 are eligible for these loan facilities. The main consideration, particularly for smaller securities portfolios, is that the stocks, bonds, mutual funds, etc. in the portfolio are of sufficient price and trading volume - what you might call - "quality" - to achieve loan eligibility for underwriting purposes. Most marketable securities with a reasonable track record will qualify under this standard for at least one quote. Diverse portfolios of multiple quality securities will naturally get the best quotes. For more on loan eligibility, please see our stock loan / securities loan criteria page. (Keep in mind too that this loan facility will also accept "securities-like" assets, such as Christies and Lloyds-appraised professional certified artwork. Inquire.)

Are there any capital gains taxes?

While we cannot by law provide any form of tax advice, this program requires a transfer of your current brokerage account to an account with your SIPC-member Lender to complete the loan. Transferring of shares in and of itself is not a sale of securities, and does not incur any common taxation issues, so this should not be a taxable event. Note also that your loan leverages your securities, and does not sell them. However, we always recommend that our borrowers use the services a icensed tax professional for any tax-related questions or issues of any kind for any financial transaction, including this loan program.


What if I want to swap out my current collateral with other eligible securities, even though I don't want to formally exit the loan yet?

This is possible with this securities-based line-of-credit facility. One of the many flexible features of these loan programs is that with lender's permission you can swap out the current set of collateral securities for a replacement set of approximately equal quality and value, allowing the potential to unfreeze and regain your original shares mid-loan if you should need them for other purposes. Your lending institution is happy to work with you should this scenario arise.

Are any other types of collateral acceptable for your program?

Virtually any marketable security is eligible for consideration, from municipal bonds to T-bills, to U.K. stocks to mutual funds. (Please see our criteria page for details). As of of March 1, 2010 this institutional loan facility can now be used with verified and certified works of art provided they have been officially certified and valuated by by an appropriate agency. (Contact us for more information on artwork collateral.)

How soon can I expect to see my loan funds?

Within 48 hours of signed credit line documents, or 5-7 business days from initial loan inquiry is standard. We measure receipt of loan funds by gauging the time from which the loan documents are signed. If the collateral and your new account have been set up (same day may be possible in some cases) and you have read and approved the terms of your loan offer, you will sign the loan documents in as few as 24 hours. From that point until funding - typically the wiring of most or all of the credit line - is 48 hours for processing.

Suppose I have an immediate problem or question. Who will I be contacting?

You will always have several options. One of our staff will always be available to speak with you for any issues prior to the signing of your Term Sheet. We are also available 24/7 to support you as needed post-loan, as you will have your account manager's direct number.

Once you have signed your completed your loan documents and have moved on to your institutional lender, you will speak and work with your licensed account advisor at the brokerage/bank that will be writing, administering, and manage your loan.

Do I get regular account statements?

Yes, as with any brokerage/banking account.

Do you have an Affiliate program?

Yes. Our Affiliate program is divided into two functions: One is for internet banner affiliates only - a trackable banner is placed on your website and referrals are credited to you, with payouts to those that result in a closed loan (not for clicks alone). The system is fully automated, with a wide range of banners to choose from. It is available to anyone with a suitable website (good traffic, appropriate audience). The program pays $250 per closed loan at time of closing, automatically, to the referring party.

Our special Affiliate program is a conventional broker-advisor type program, which pays at a different rate. However, this program is open only to individuals who:

(1) A relevant background in finance, securities, real estate, or related field with a clean legal background dating back no less then five years; and

(2) An actual transaction, evidenced by an account statement; and

3) A verifiable, pre-existing sales channel or appropriate pre-existing network of potential clients for our securities finance services. Our ideal affiliate is an independent financial advisor who works with a large number of high net-worth clients.

Please note that we cannot accept for affiliation individuals seeking to develop brand new markets, sales channels, or networks for our securities loan services when none currently exist. Networks, outlets, or conduits should be pre-existing or easily developed. We strongly encourage established independent and/or registered investment advisors, real estate professionals, and other related financial professionals to apply. (Click here)

We will often place those who do not have live transactions (qualified clients ready to apply for one of our loans) into an Affiliate Status Pending category until they have an actual client to present, at which time their affiliation application will be reviewed and the affiliate admitted formally.

For further details and answers specific to any of these questions, please inquire here. We will respond promptly.

HOME

Neither Securities Finance LLC nor its partners or associated provides any form of tax advice or guidance. Please consult with a licensed professional for tax guidance.
Use of the information on this website assumes that you have read and
agree in full with Securities Finance LLC's Use and Disclosure Statement.
Please click here to download the statement, or exit this site if you do not agree.

Copyright © 1999-2010, Securities Finance LLC. All rights reserved.