Questions and Answers.

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, 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. ETF’s (exchange-traded fund ), ADR’s (American Depositary Receipt), Foreign Stocks are ALL eligible. Typically, we look for a minimum $75,000 daily trading volume for each publicly traded stock. Major Stock Exchange stocks are preferred.

Are Penny stocks eligible?

Sorry, Penny stocks are NOT eligible for a stock loan. None.

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 collateral and the only recourse the lender has is against the stock. You have NO personal liability exposure. NO liens.

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. Many non-U.S. securities are allowed to be put up as collateral. Some of the other countries include Canada, UK, European countries, Hong Kong. Israel, Australia, India, and Korea, to name just a few. We work with clients located all over the world.

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 $75,000 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. Exxon, Proctor and Gamble, and Cisco are considered blue chip stocks and ideal cases.

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.

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. (Interest Only) Stability, trading volume and share price are factors in determining the interest rate. Loans for bonds , the interest rate may be lower, particularly T Bills.

Can you do a stock loan for a foreigner?

YES we can. We have successfully closed many loans with borrowers living in Europe. Asia and many countries around the world. Your location or where you live does not matter. If your stock is traded on a foreign stock exchange, we can help.

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 requested. 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 paperwork. Complete this very simple form (5 Minutes) and return to us.

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 dealer.

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?

NO personal liability. None. If you do not make the interest payments when due or fail to repay the principal when due, our only recourse is against the collateral which is 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.

Are there any tax consequences?

The stock loan transaction is a non taxable event per section 1058 of the Internal Revenue Code.

Yes, most types of bonds are eligible, such as the US Treasuries, Corporate bonds, etc. T Bills can be pledged as collateral with fixed interest rates from 2% and sometimes lower. And, we may be able to structure the terms as a matching, where all the coupon interest from the bond goes toward the interest due on the loan. This means that no interest payments would be due on the loan.

What stocks are NOT eligible for a Stock Loan?

Closely held Stock, Private Stock, Penny stocks and restricted stocks. We will consider certain restricted stocks on a strict case-by-case basis only, if traded on NYSE/NASDAQ. Again, Must be Publicly traded stock only. No exceptions.

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.

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, please click here.

What happens if I default on the loan? or What are the tax consequences?

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 decreases or falls significantly?

We offer TWO different stock loan programs or options to choose from.

Option ONE . If the stock portfolio decreases in value, the borrower can default without penalty. This means NO cash or additional shares are required. Just walk away from the loan without making a payment. It’s not callable.

Option TWO . 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. 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 give 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.

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%.

The most attractive interest rates and terms and conditions are available to those publicly traded 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. Exxon, Proctor and Gamble, and Cisco are considered blue chip stocks and ideal cases. Strong and steady volume is highly prized as it allows some predictability baselines. Good stocks, like good investments, always get the best terms. A precise FREE analysis will be provided when you apply. Stability, trading volume and price are factors in determining the interest rate, term and Loan to value. 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. When providing a FREE quote, we will explain how these factors relate to your securities presented as collateral.