What Is Stock Loan: Securities-Based Lending?
The term securities-based lending (SBL) refers to the practice of making loans using securities as collateral. Securities-based lending provides ready access to capital that can be used for almost any purpose such as buying real estate, purchasing property like jewelry or a sports car, or investing in a business.
Securities-Based Lending also is called: Stock Loan, Stock-Backed Loan, Stock-Based Loan, Securities-Backed Loan, Securities-Based Loan, Securities-Collateralized Lending, Stock-Backed Borrowing, Securities-Based Borrowing, 股票贷款, 股票质押贷款，股票抵押贷款, etc. by different Borrowers and/or Lenders in different countries.
KEY TAKEAWAYS
- Securities-based lending provides capital to help people buy real estate, to purchase personal property, or to invest in a business.
- These kinds of loans are generally offered to high-net-worth individuals or shareholders of public listed firms.
- The lender becomes a lienholder after the borrower deposits their securities into a special account – the Custodian A/C managed by 3rd party Custodian Bank and/or Securities Firm.
- Borrowers benefit from easy access to capital, lower interest rates, and greater repayment flexibility and also avoid having to sell their securities.
Understanding Stock Loan: Securities-Based Lending
Generally offered through large financial institutions and private banks, securities-based lending is mostly available to people who have a significant degree of wealth and capital. People tend to seek out securities-based loans if they want to make a large business acquisition or if they want to execute large transactions like real estate purchases. Such loans may also be used to cover tax payments, vacations, or luxury goods.
Here’s how the process works. Lenders determine the value of the loan based on the borrower’s investment portfolio. In some cases, the issuer of the loan may determine eligibility based on the underlying asset. It may end up approving a loan based on the market value and liquidity of the stocks. Once approved, the borrower’s securities ( stocks ) – the collateral – are deposited into a custodian account in the 3rd party custodian bank and/or securities firm. The lender becomes a lienholder on that account. If the borrower defaults , the lender can seize the securities and sell them to recoup their losses.
In most cases, borrowers can get cash within just a few days. It’s also relatively cheap—the rate borrowers are charged is generally variable based on the 30-day London InterBank Offered Rate (LIBOR). Interest rates are typically two to five percentage points above LIBOR, depending on the sum and the liquidity of borrower’s securities ( stocks) and stock’s firm’s market cap.
Also known as securities-based borrowing or nonpurpose lending, securities-based lending has been an area of strong growth for investment banks since the global financial crisis(GFC). In fact, securities-based lending accounts and balances have surged since 2011, facilitated by the steady rise in equities and record-low interest rates. Such credit is popular because it tends to be easier to obtain and requires far less documentation than a traditional loan.
Advantages of Stock Loan: Securities-Based Lending
Securities-based lending has a number of benefits for the borrower. It precludes the need to sell securities, thereby avoiding a taxable event for the investor and ensuring the continuation of the investor’s investment strategy.
As noted above, SBL offers access to cash within a couple of days at lower interest rates with a great deal of repayment flexibility. These rates are often much lower than home equity lines of credit (HELOCs) or second mortgages. SBL works best when used for short periods of time in situations that demand a significant amount of cash quickly such as an emergency or a bridge loan.
SBL also provides a number of benefits to the lender. It offers an additional and lucrative income stream without much additional risk. The liquidity of securities used as collateral and the existing relationships—with typically high-net-worth individuals (HWNIs) and/or shareholders of public listed firms who use the SBL facility—also mitigate much of the credit risk associated with traditional lending.
Our Lending Size
Our lending size range is: USD1MM to USD1B+.
Our LTV range
LTV is Loan to Value ratio
Stock Loan LTV ratio = Stock Loan Lending Amount / Stock Collateral’s Market Value
Our LTV range is: 40% to 70%
Our Annual Interest Range
2.95% to 5%
Our Lending Term: Loan Maturity Date
2 to 5 years
Other Optional Collateral Choices:
For Loan(Collateral Lending Deal), except Stocks, the Other Optional Collateral that borrower can use with us could be: Bonds, Notes, Warrants, Bitcoins(or ETH, LTC, XPR), Mutual Fund, Real Estate(HK, US Profitable RE assets are priority choice), Aircraft, Jet, Plane, Yacht, etc.
How to apply?
You can apply for our tailor-made Stock Loan: Securities-Based Lending by contact:
Mr. Bill Wren
WeChat: billwren
Cell/SMS/WhatsApp: +86 – 186 5206 1897
Email: bill(dot)wren#wrencapital(dot)me
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Wren Capital 