A securities lender agrees to borrow investments in exchange for collateral. This market contributed over $2 trillion in 2017 to global lending. The securities market is usually reserved for big traders.
Few realize the model offers stock loans using their securities and investments.
We've collected five questions to ensure the agreement are mutually beneficial. How the lenders respond will pose less unexpected risks when lending securities.
Stock loans provide funding without the need to liquidate investments and assets. The business exchanges stock for a loan determined by the securities lending company.
Stock loans allow the business to flourish during economic downturns. Or, when in need of capital injection to expand operations. It's like when homeowners refinance their home.
Deciding to take on a stock loan should pose the following questions:
A securities lender mitigates risk by offering loans to those owning non-marginal securities. Non-marginal securities are 100% owned and funded by the investor.
These may include:
Initial public offerings (IPOs)
Over-the-counter bulletin board stocks
... or any others not having been purchased on a margin by a brokerage.
A securities lender providing loans are direct or indirect lenders. Direct lenders use in-house underwriters to determine the safety of the transaction. A credit check is not necessary when working with most direct lenders.
This proves beneficial for reasons of confidentiality. No information displays to the public. This prevents uneasiness with the business investors.
The collateral in traditional securities lending is cash and securities. However, stock loans use the non-marginal securities as collateral.
This presents two usual outcomes for the borrower:
Repay the loan and have the securities returned
Walk away and forfeit the securities
The loan terms dictate the repayment time frame (often 12 - 36 months) though varies by client needs.
Each securities lender process loan inquiries using in-house metrics. Yet, most use a "Competitive Loan to Value" ratio for risk assessment. This is the stock loan amount divided by the securities value.
Other factors may include:
Intended use of capital
Risk levels based on business volatility and holdings also factor in securities underwriting.
Dire needs for capital injection is the attraction to stock loan options. The average turnaround, after closing, is typically 24-48 hours. Ask how the securities lender process the funding for a clearer time frame.
What if the business faces tough financial positions to stay afloat? You've weighed the options and bank loans aren't quick enough. You refused to liquidate assets.
Stock Loans Solutions provides a non-recourse solution to securities lending.
You transfer stock to us, agree to payments, and we'll provide a loan set to the value of your stock. There are no credit checks, funding is fast, and rates flexible.
Talk with one of our loan specialists (1-866-446-1009) or contact us to learn more.
The information contained herein is presented solely for the purposes of discussion and under no circumstances should this be considered an offer to buy or a solicitation of an offer to sell any security. Stock Loan Solutions is not a registered securities broker-dealer or an investment adviser with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. Stock Loan Solutions, its managers or affiliates have not been registered and do not plan to be registered under the Investment Advisers Act of 1940 or any similar state or foreign securities laws. Stock Loan Solutions is not registered under the Investment Company Act of 1940 or under any similar state or international securities laws. Stock Loan Solutions does not offer any form of investment (buy or sell) advice, tax counseling, estate planning, or any other securities or financial advice whatsoever. No statements on this website or any verbal or written statement by any representative shall be construed as such advice. We are neither licensed nor qualified to provide investment advice.
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