Securities Based Loans

Published By Credit Suite at December 30th, 2015

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What Are Securities Based Loans? And Why Do They Matter?

Securities Based Loans are an excellent source of funds for someone who holds publicly traded stocks.

Securities-based lending is generally going to involve a revolving line of credit. So this uses your eligible investment portfolio as collateral.

This funding option permits you to access funds without immediately liquidating your portfolio.

In turn, this gives you the ability to access liquidity. And you can do so while maintaining your portfolio’s current exposure to the market.

You will continue to receive the benefit of any dividends, interest or capital appreciation that may accrue in the account.

Great Benefits to Securities Financing

Some of the other main benefits of securities financing include the following.

Interest rates range from 2.5% to 4.5%, fixed, interest only payments.
There are loan periods for up to 10 years
Loans are NON-recourse, and not recorded
Borrower retains full beneficial interest (dividends, appreciation, etc.)
You can use these funds for virtually any purpose, anywhere in the world
Borrower’s nationality and residence can be anywhere in the world

The Details

This is a non-recourse, non-recorded loan and the lender cannot come after you personally. Plus, they can’t report you to the credit bureaus in case of non-payment.

But if you default, you get to keep the money. Yet the lender gets to keep the stock as the sole remedy.

At the end of the loan period, the borrower will get back shares from the lender. Yet these are the same number of shares first pledged as collateral. So this automatically includes any appreciation as well.