Stock Loan FAQs

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					What is a Stock Loan?

Non-Recourse Stock Loans by definition is a loan against the value
of a stock or portfolio of stocks whereby the shareholder (OWNER)
can borrow up to 80% of the stock value (in some cases higher) of
the portfolio’s market value "without selling the shares". Like a
home equity loan for stocks but much better. You borrow against
the appraised value of the portfolio and pay a below prime interest
rate for the term of the loan. And then at term end you either pay off
the loan and receive your stock back with any stock appreciation,
refinance the loan, or if the stock price has fallen below the LTV
amount, forfeit the shares without paying back the loan (non-
recourse) with no liability or effect on your credit rating.
What stocks are eligible for a Stock Loan?
Any publicly traded security are eligible. Stocks, bonds, mutual
funds, ETF's (exchange-traded fund), ADR's (American Depositary
Receipt), Penny Stocks (stocks on the pink sheets or bulletin board
stock), Foreign Stocks and Bonds are ALL eligible. Typically, we
look for a minimum $50,000 daily trading volume for each publicly
traded stock.
Am I personally liable for this loan?" or "Can the company come
after me on this loan if I do not make payments?

NO, this is a "non-recourse" loan; the lender cannot come after you
personally. There is NO personal liability associated with the stock
loan. The only security for the loan is the stock and the only
recourse the lender has is against the stock. You have NO personal
liability exposure.
Is the loan reported to the credit bureaus or reporting services?
NO, the Securities loan is not reported to the credit bureaus and
there is NO public record of this loan. Even if you elect to walk
away from the loan and default because, for example, you have
more money then the stock is worth, it is NOT reported.
Are non-U.S. securities allowed to be used as collateral in stock
loan transactions?
Yes. Some non-U.S. securities are allowed to be put up as collateral.
Some of the other countries include Canada, UK, European
countries, Japan, Israel, Australia, India, and Korea, to name just a
What are the Loan to Value (LTV) percentages for the loans?
The LTV’s vary depending on the quality of the securities being
collateralized. With high quality large cap stocks you can expect
LTV’s up to 80% (sometimes higher) while with small cap or pink
sheet (penny stocks) securities the LTV’s will be more conservative
and lower. This means it can be as high as 80% LTV but can be
Lower. It depends upon the quality and type of security owned.
Each loan is evaluated on a case-by-case basis. The highest LTVs
are offered to high quality securities such as Blue Chip stocks.
How are the stocks evaluated?
Stability, trading volume and share price are factors in determining
the interest rate, term and Loan to Value. Good stocks, like good
investments, always get the best terms. Typically, we look for a
minimum $50,000 daily trading volume for each publicly traded
stock. The most attractive interest rates and terms and conditions are
available to those stocks with good strong and steady volume and
price, and low volatility. Prices over $5/share typically get best
prices as long as volatility is low and volume is strong and steady.
Strong and steady volume is highly prized as it allows some
predictability. The leading indicators when determining the
eligibility of a stock as collateral are going to be exchange,
volatility, share price, liquidity, trends, filings, short term trading
volume and long term trading volume.
What interest rates are available?
(Interest Only)
From 3% Fixed interest Rate: This means it can be as low as 3%
and can be higher. It depends upon the quality and type of security
owned. Stability, trading volume and share price are factors in
determining the interest rate.
Is a "Credit Report" required?
NO credit report is required and NOT requested. Whether you have
great credit, bad credit, or no credit, there is no need to be
concerned. NO credit report is pulled.
Is my income and employment verified?
NO, your income and employment is NOT required and NOT
disclosed. Our simple application does NOT ask or require this
information. It's a TRUE NO DOCUMENTATION Stock loan. NO
job, NO problem! Self-Employed, NO problem!
How long does the loan process take to close?
Unlike the mortgage process, a Stock Loan can close in 5-7 days
depending on the speed at which the borrower processes the
Is there a restriction on the use of the cash loan proceeds?
You may essentially do anything with the cash loan proceeds. Buy a
business, buy a home, pay-off a mortgage, business expansion,
investment real estate, etc. You cannot buy or carry marginable
securities with the proceeds. However, that is a disclosure issue for
you about the sources of the funds and lies with the bank or broker
If the stock issues a dividend during the loan, will I get it?
Yes, you will receive a credit against the interest payment of all
amounts equal to dividends, interest or other distributions on the
stock during the term of the loan. However, you do not get the
dividend directly.
What happens if I default on the loan? / What happens if I fail to
make my payments?
If you do not make the interest payments when due or fail to repay
the principal when due, our only recourse is against the stock and
NOT you. The loan will be terminated and cancelled. You get to
keep the money received from the stock and the lender gets to keep
all interest in the stock. The default or termination is NOT reported
to any credit bureaus.
What stocks are NOT eligible for a Stock Loan?
Closely held Stock, Private Stock, Certain restricted stocks. We will
consider certain "restricted" stocks on a case-by-case basis.
Are there risks involved with stock loans?
It is important to know that risks are involved with any type of stock
transaction due to the changing nature of stocks. With that said,
stock loans are often placed in a minimal risk category. This is due
to various reasons, but mostly due to the non-recourse nature of
many stock loans.
Who owns my stock during the loan? / Who has title to my stock
during the loan?
The stock is transferred to the lender which has full title, but you
retain all beneficial interests in the securities. You will receive any
dividends, interest or any other benefits that flow from the stock
during the term of the loan. We also offer a special loan program
that allows you to retain title and ownership.          Ask for details.
Is the transfer of my shares to the lender safe?
Yes. Transfers occur via secure, nationally and internationally
accepted transfer using the DTC system - the safest and most
common system in the U.S. securities industry. Stocks reside in
these transfer accounts to await the hedging process, or are moved
directly into the lender's U.S. safekeeping account for the duration
of the loan term, depending on the loan program chosen.
Confirmations of every step of the transfer process, by phone and e-
mail, are provided upon request to every client. DTC transfer is in
sum a common stock transfer method used by banks and brokerages
throughout the U.S. and many foreign countries, with an excellent
record for security and transparency. For more information on the
DTC system, click here.
What happens if I default on the loan?" or "What are the tax
On a non-recourse loan you, as the borrower, have NO personal
liability. There are general rules we can share regarding tax
treatment of a default. The amount realized is the difference
between the loan amount and the cost basis in the stock.
What if the value of the stock falls significantly? / What does this
default provision in the loan mean?
If the value of the stock falls below the agreed minimum value in
the contract, then there is an event of default. The minimum value is
80% of the loan amount, or whatever is agreed upon.
For example, assume the stock had a full market value of $10 per
share when the loan was made. Also, assume the loan terms
established a 70% LTV, so the loan was for 70% of the full market
value or $7 per share. If the value of the stock falls below 80% of
the loan amount, here $7, then there is a default which can be cured
by the borrower. In this example, the share price would have to go
below $7 x 80%, or $5.60 per share. For a default to occur, the share
price in the example must fall more than 44%. While the interest
rate and interest payment remain constant, due to the volatility of
the collateral, the contract may require the borrower to contribute
additional cash or shares to keep the loan viable. The decision to
tender additional cash or securities is solely in the borrower's hands.
The borrower could choose not to risk more capital and terminate
the loan, or the borrower could choose to keep the loan in good
standing by curing the default caused by the loss in value of the
collateral. The additional cash or shares tendered to cure the default
do not become part of the collateral for the loan are not subject to
repayment or refund at any time. At origination, the borrower and
the lender agreed to a minimum fair market value for the collateral
of the loan. The payment of the additional cash or securities
establishes a new lower minimum fair market value and higher risk
threshold for the lender and borrower alike. Those funds "buy-
down" the price of the security to set a new floor for the stock and
thus maintain the minimum value ratio between the amount of
money loaned and the minimum value of the security for which the
lender is willing to be at risk.

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