Stock Loan and Securities Finance FAQ
1. What are the advantages of your securities-based line of credit? [Stock Loan FAQ]
We exclusively offer SIPC member managed finance programs through major, top tier global institutions (household names). Your securities assets will remain in your own account at that institution and in your ownership at all times. You will enjoy a convenient line of credit with attractive interest only payments and no prepayment penalty. Our securities finance program offers higher loan to values, better rates and more flexibility than a traditional margin loan. Our programs are non-purpose which means you can utilize the proceeds for a multitude of liquidity needs.
Additionally, we offer the lowest interest rates and closing fees in the industry.
2. Please tell me about institutional stock loans vs, private transfer-of-title loans.
During the loan term of transfer of title stock loan, the borrower transfers legal ownership of the assets via a contract with the lender (this is also referred to as "beneficial ownership" or "contractual ownership".) A client should make an effort to obtain the assurances they need as evidence of the private lender's financial stability.
In a typical transfer-of-title loan, some or all of the shares may be sold to create the cash to fund the loan. The borrower will have given the lender the right to do so by way of the signed loan contract. Important Consideration: In certain cases, the Internal Revenue Service may treat your transfer of title loan as a sale at inception for tax purposes. You should consult with your licensed tax professional to determine how it will affect your individual circumstances.
With institutional non transfer of title financing, the shares are not sold to fund the loan in any manner. Instead, funding is direct via a deposit to the borrower's account within the institution. A simple lien is placed on the asset within the borrower's institutional account.
Keep in mind that there are certainly benefits to both types of financing depending on the type of securities asset and the borrower's situation. You should consult with your attorney and your tax professional before entering into either type of loan contract.
3. Does the lender require a credit check and a long list of personal financial documentation?
No. Our securities finance program requires very little documentation. Your credit score, income, debt ratios and employment are not considered as factors in determining your loan offer. In some cases there may be a "soft credit check" just to make sure that you aren't currently in bankruptcy proceedings -- your loan is almost certain to be approved.
4. Will we need a large portfolio of securities to participate in this loan program? Do I need multiple securities in my portfolio?
No. The minimum loan amount is just $100,000 for domestic loans and $500,000 for international loans. We welcome mixed portfolios and concentrated portfolios alike.
5. Are we held only to the loan quote(s) provided on their Term Sheet?
No. Your term sheet is non-binding and represents your initial line of credit securities loan proposal – it is your minimum offer. Once the term sheet is signed and you are introduced to the lending institution, you can certainly request modifications in discussions with your registered account advisor. The goal of the term sheet is to get you to the place where you can establish the exact securities financing you desire directly with the institution, either what we have provided on the term sheet or a variant arranged through your account advisor prior to final loan documents.
Keep in mind that we work through several institutions. We initially evaluate your needs and your particular securities assets (pre-underwriting) and then determine the ideal institution for your specific situation. Once we have analyzed your collateral and needs, we then deliver your personalized term sheet.
Your next step will be to sign your no-obligation term sheet to signify your understanding of the basic line-of-credit terms as offered, then either accept those terms or finalize your terms further directly with your institutional advisor who will address your questions, priorities, and objectives and to the extent possible, make adjustments if necessary and allowable. The loan documents are then signed, a temporary lien is placed on your securities in your account, and the funds are made available for withdrawal.
6. At what point do I begin to incur an obligation?
There is no obligation until you sign your loan documents. There is no obligation to apply for a quote or to obtain a term sheet beforehand. Even after you have signed your term sheet and set up your account, you are under no obligation to proceed with your loan if you choose not to. Again, once the term sheet has been signed you will be taken directly into the correct desk at one of our lending institutions with a representative assigned to assist you and to process your loan. Your advisor will help you transfer your collateral into your own new brokerage account.
After retirement of the debt, as with any asset-secured loan, the lien placed on your shares in your account is immediately lifted and you will have full freedom thereafter to trade, sell, or transfer the shares any way you choose.
7. Do you have a referral program?
Yes, we welcome referrals from an international network of colleagues.
8. Can you give me the names of the lending institutions before I sign my term sheet?
No, however, once you have signed your term sheet we will personally introduce you to the specific institutional advisor who will be working with you throughout the remaining process, and who is committed to serving the unique needs of US Best Capital Partners’ clients.
9. Can't I get these loans on my own by calling my broker or bank and asking for the same terms or structures?
No. Through special relationships with our lending institutions, we can provide loan programs for individuals that are superior to that which you can obtain on your own at any financial institution in the country.
10. What if I want to swap out my current collateral with other eligible securities, even if 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.
11. How soon can I expect to see my loan funds?
Within 48 hours of signed credit line documents 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.
12. Do I get regular account statements?
Yes. Like any bank or brokerage, you get regular monthly or in some cases quarterly account statements directly from your institution. You can also print these out via your online access, which is available 24 hours a day, 7 days a week. The traditional statements will show the status of your loan and the position of your collateral securities among other data in your reports.
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