Stock-based Loans

Stock-based Loans: An Alternative to Margin Loans

Need liquidity? Traditional banks not a good option? Have a stock portfolio? You could sell some of your holdings to raise cash. But if you believe that there’s additional upside for your investments and you would like to avoid the tax consequences of selling securities, you could consider a loan utilizing the stock, your equity, as collateral.

Essentially, there are two types of loans you can make using stock: margin loans and stock- based loans. Margin loans are provided by your brokerage firm. They typically offer loans of up to 50% of the value of the stock. However, a Lending Hub loan can offer loans up to 75%. Loans between $100,000 and $20,000,000 are typically available.

While many investors think of margin accounts when they look to leverage their investments, they are unaware that securities loans provide a more flexible alternative because they can offer a higher loan-to-value (LTV) ratio, lower fixed interest rates, and other significant advantages over conventional margin account loans.

Securities -based loans are a type of hedging strategy because the borrower is reducing their risk of investment. Whether the loan proceeds are used for paying off debt, corporate financing, home remodeling, jumbo mortgage alternative or even purchasing more stock options, the borrower will increase their assets.

A securities-based loan is a fairly simple transaction. Virtually any publicly traded stock can be used as the basis for a loan. Lending Hub can accommodate both large and complex transactions. By combining efficiencies and best practices with safe and innovative methods, Lending Hub can structure, execute, and service virtually any financial borrowing need from inception to conclusion.

Lending Hub employs the collateralization of a repurchase agreement as the financial instrument for lending. Under a repurchase agreement, the borrower sells the collateral to the lender at a negotiated price for the period of the loan. At the end of the term, the lender agrees to sell an equivalent number of shares back to the borrower, at the initial purchase price of the transaction. The borrower retains any appreciation in the value of the shares pledged as collateral. The borrower also retains any dividends distributed by the public company.

When the loan matures, the stock used as collateral is returned or an extension of the term or refinancing of the loan can be arranged based on mutual agreement. In the event of substantial decline in market value, clients can simply walk away from the loan with no additional expense because it is a non-recourse loan.

Retail and institutional investors receive a rapid and trouble-free experience with a straightforward, proven process customized to each client’s needs.

  • Low fixed rates, as low as 3.50%
  • High Loan to Values, up to 75%-
  • Non-Recourse Loan
  • No upfront cost
  • Protect the value of your share positions against share price or market declines
  • Receive 2, 3, 5 and up to 10-year loan terms
  • Borrower retains all upside market appreciation and credit for any dividends
  • Fast, efficient process, loan funding in 7 – 10 days
  • Loan proceeds can be used for any purpose

 

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