When you have an unusual or non-standard situation – perhaps securities that trade freely but have some unusual or limiting conditions upon them – we can often find a solution. Though we cannot take 144 Restricted stock, or stock trading only privately or held privately (as opposed to trading freely on a major market like the New York Stock Exchange). Sometimes an arrangement that complies with applicable legal requirements of the company, state, and federal rules can be put together so as to create an asset the institution is willing to lend against. We can’t do them all, but if the securities you use have a free-market variant trading at $1M a day or more, with a price of at least $5/share, we may be able to provide a credit line.
You are always welcome to join us if you have an existing network of potential clients and a clean background in finance, real estate, business capital formation, or a related field that interfaces with potential LeverageLine clients. Agents must comply with ABN and lending institution rules, but are free to refer clients into the program. A robust and very secure clickthrough application and information system is encouraged. For organizations, a webinar training session is available. Apply here to become an agent.
LeverageLine is a wholesale stock portfolio loan (credit line) program that does not require the transfer of title or ownership to the lender as a prerequisite to funding.
It is a securities-based credit line program – essentially a stock portfolio loan – with custom features and great versatility developed expressly by A. B. Nicholas to serve the needs of the franchise, business-buying, and real estate investor markets. It is in use by over 3,000 affiliates around the country and we have served hundreds of satisfied clients since 2010.
It is a credit line program managed entirely by and through one of several major U. S. brokerage firms and a specially selected, fully screened, multi-licensed FINRA-member advisor at that institution with extensive experience in our target markets who is also willing to provide the specific features our clients, in these markets, require.
The result (and it wasn’t easy!) is a very fast, low-interest finance facility with no add-on costs that our typical borrower did not seek. There are no lender account management fees, no hidden charges, no penalty for early payoff, and no maturity date as this is a revolving line of credit.
Essentially our LeverageLine is a no-title-transfer stock loan program. There is no transfer of title or ownership to the lender in advance as a precondition to funding and there is no sale of the client’s securities to fund the loan. Our borrowers therefore enjoy a lending facility that is not only a great funding tool, but also a tool that opens the doors to further conventional funding via a major U. S. financial institution later that might not have been possible without having established an asset-based loan via LeverageLine first.
An account is opened for the client at the lending institution – a top-tier, household-name U. S. brokerage – which, with the client’s permission, brings their securities into this client-owned new account. There is no joint ownership; instead, a simple background lien is placed upon the collateral assets in the account by the banking division of the same brokerage lender. A linked account is open, the funds can be drawn via check or wire in any amounts, and at the same interest rate regardless of amount drawn. Note please that many clients qualify for far more than they need, as the rate that applies to all draws is based on the maximum credit authorization available to you. For example: if you qualify for a $1 million line but only need $200,000, your rate might be 2.8%. That 2.8% will apply to any amount you draw, whether it was $50 or $ 1 million. The 2.8% would apply. Conversely, if the client needed $200,000 but only used enough collateral to qualify for, say, a $250,000 authorization, then the rate would be perhaps about 4.2%. Thus, whether the client took out $50 or $200,000 their rate would be 4.2%.
No documentation is required beyond identity verification and a brokerage statement to obtain your no-obligation term sheet, which is essentially pre-approved financing based on the veracity of the documents and other information you provide with your secure online application. Credit is not used to determine your loan terms, although you can be denied financing if you have a bankruptcy or foreclosure over the prior five years, or an abandoned student loan where no repayment arrangements have been made.
LeverageLine was designed originally to meet the needs of our core markets – franchisees, business buyers, and commercial real estate investors. Today it serves a variety of purposes, and can be compatible with other lending programs including SBA lending.
All LeverageLine interest rates are variable rates, based on a discounted “house” rate (an institution-determined figure based on various indicators) that is keyed to the size of the credit line offer; to this is added a small increment based on 30-day (monthly) LIBOR. (See the 30-day LIBOR rate on any of the major financial sites, including Bloomberg or Bankrate; the rate has remained within a relatively small range of variance over the last seven years.)
You may also opt for fixed rate financing if you wish. Inquire of your licensed lender advisor if this is of interest.
No. You will never be required to give up the ownership of your securities in any manner, or to sell your securities, as a precondition to funding, with ABN’s LeverageLine program.
With your permission the securities you wish to use as collateral will move to your own new account at your lending institution (an ABN partner and one of several top-tier fully regulated public and licensed firms that have agreed to offer this model of stock secured loan). Your term sheet will reflect the institution that has provided the best rates and other terms, and your account will be exactly like any other modern U. S. brokerage account with online access, freedom to trade, and all other features. The difference is that you’ve come to the program seeking financing, so your lending agreement will be waiting for you. This will mirror your term sheet – there are no surprises – and if you choose to sign, a separate bank account is opened and your cash is then available by wire or check.
With LeverageLine an account is opened for you at your lending institution. The account is no different from an account at any modern U. S. brokerage (SIPC-insured, online access, reports on demand – all standard) because that is precisely what it is.
With your permission, those securities that you wish to use to back your credit line will move to your new account and this will be handled for you, institution-to-institution (“ACAT”) — a common practice among large brokerages and banks. At all times your securities remain yours alone, in your account only at your new licensed lending institution. Though your lender’s banking arm will have a lien on the portfolio loan account, the securities are not jointly owned. The lending institution will only exercise any rights in the most extreme cases of default and no resolution, at which time you may be compelled to sell enough shares to make your lender whole.
A. B. Nicholas is rated “A+” by the Better Business Bureau and has had no complaints to date. We work for our clients, not our lenders, and take client satisfaction very seriously. (To look up our rating on the BBB official site, please click here)
Our current partner institutions, all of which have agreed to provide the LeverageLine credit line model of wholesale securities credit line financing in the manner we have requested, are all major, top-tier, household-name, licensed public SIPC/FINRA institutions. We do not work with any other type of lender.
We use only carefully selected, licensed, experienced individuals employed by the largest brokerage/banking firms in the country. These are individuals who have agreed to provide the wholesale LeverageLine model of securities credit line finance to our clients.
All advisors within these institutions are top-notch professionals with many years of experience particularly in the franchise, business-buying, and commercial real estate areas. All are multiply licensed Certified Financial Planners and/or Registered Investment Advisers in good standing, with unblemished FINRA records. (Each has a record that can be quickly confirmed online at www.finra.org.)
However, even this is not enough to become an A. B. Nicholas lending partner. The registered and licensed advisers within these institutions must also have extensive experience with franchise and commercial real estate clients. They must understand the needs of these types of borrower, not just presently, but for future development of their business aspirations.
Finally, to make the grade out of the many advisers who seek to become A. B. Nicholas lending partners they must have an excellent, patient, no-pressure listener approach to the needs of each client and each credit line account. Our advisers all take the time to go over any and every detail of the program and answer questions of all kinds. Our goal is your satisfaction.
Today we are proud to say that our adviser staff is the best there is at what they do. We are confident that you are in good hands when you come to A. B. Nicholas for your securities-based financing needs.
Yes, you can have both an SBA loan and a stock secured loan like LeverageLine as far as your LeverageLine lender is concerned. You can take out a LeverageLine using your securities as guarantee first if you wish, and a lien is then placed against those securities by your lender. When applying for an SBA loan you will of course list your securities as your assets, though you will need to disclose that they are already guaranteeing other financing which may or may not affect your SBA loan offer. Only one lien on these assets is possible at a time.
This program has been designed for the franchise, business and commercial real estate investor, so it can also work well with many other financing programs. It offers speed, security, and very low rates. Have the extra cash you need, when you need it. Your carefully selected licensed lender adviser is experienced and easy to work with; and will always aim to meet your specific requirements and special conditions if they arise.
Yes, your LeverageLine securities credit line is callable; in practice, however, this has been historically infrequent because your lender will analyze your portfolio and set your loan-to-value very carefully. Still, a call to shore up value of your portfolio, even if rare, can happen at any time.
It’s common sense: Like any legitimate asset-based loan, the asset must have sufficient value and worth to cover your lender’s risk of loss. Practically speaking, this means that, from the lending institution’s risk department’s perspective, if your portfolio should drop dramatically to the point that it no longer sufficiently covers your withdrawn loan principal, you will need to restructure your whatever is dragging down your collateral’s value.
However, your lender has taken steps to minimize that risk to the extent possible, and it begins with an analysis of your holdings by the risk department of your licensed lending institution when your term sheet is generated. Next, this line of credit averages all of your securities together, so that one falling stock need not necessarily affect the overall collateral value if other stocks are offsetting it (the average of all the securities decide the value for maintenance purposes.)
This is different from margin loans, which are capped at 50% LTV for stocks and deal with only one stock at a time – not a basket of averaged securities as with LeverageLine — making a drop in value a much bigger risk.
— Your lender offers this as a relationship-oriented credit facility that includes a client-supportive call policy;
— Your securities are carefully analyzed for strength and eligibility by your lending institution before your quote is delivered, ensuring maximum accuracy;
— Your loan-to-value is set at a point that the lending institution believes it to be of reasonable risk; the last thing your lending brokerage wants is a call, since they seek a long-term financial relationship with each client.
Our record of only a few calls over many hundreds of LeverageLines (and each of them easily and happily resolved with some minor restructuring of the portfolio) begins with the qualifying securities.
LeverageLine clients will have securities that trade at least at $5 per share, with consistent trading volume (at least 200,000 shares trading per day). By setting the minimum price-per-share in this way, LeverageLine tends to weed out those securities where a small drop would represent a large percentage of that securities’ value. For example, a drop in value by $1 on a $50-per-share stock is only 2% of that stock’s value; but the same drop on a $2 stock would be a call-initiating 50% of its value. Your lender’s risk underwriting department makes a careful evaluation of the securities in each portfolio and only then delivers a quote that they believe to be a smart “bet” for solidity and performance. Historically, this has worked well.
Of course, these are securities we are discussing: as with anything involving securities, there is never any guarantee that a major price drop will never occur. But it does mean that loan offers are based on a careful evaluation of the history of each security in every portfolio and are not simply random figures. It’s in your lender’s interest to keep you as a long-term client: having you go through a call scenario is not the best way to achieve that objective.
Your licensed lender advisor keeps an eye on all securities credit line accounts and remains in close communication with you at all times to assist if needed. Client satisfaction is very important to us.
The overall loan-to-value on your term sheet will represent an average of the different types of securities in the portfolio (e.g., stocks, bonds, mutual funds, etc.) even though each individual security may be assigned a different lending value. Thus, your portfolio might include 70% for your stocks, 75% for your bonds, and 95% for cash. Each will have its own required maintenance even though your loan quote will average all of the numbers together. The line availability, for maintenance purposes, is based on the overall value of your portfolio.
Keep in mind that your licensed lender adviser receives no mandatory account management fees and has provided what amounts to wholesale rates on request from A. B Nicholas for its clients. Though our clients are not pressured into any additional services, your securities credit line lender naturally hopes that at least some percentage of A. B. Nicholas’s referred clients will choose on their own to be candidates for these additional services in the future. For this reason alone your adviser will always seek to resolve any falling portfolio value issues as quickly as possible with the least impact on the client.
A term sheet is detailed explanation of your credit line offer, informed by your licensed lending institution. It is based on the information that you will have provided on your initial LeverageLine application, principally your brokerage statement.
Application for your quote is through a heavily encrypted, secure site with a lockbox style, password protected area for your lending institution’s use only. (See the application page here). Once a quote is delivered to A. B. Nicholas via this system, the documents in the secure area are purged and overwritten for added client assurance.
Your quote spells out your estimated credit line offer with ranges; once delivered, we are available to speak with you directly to go over the term sheet, confirm your lending institution, and confirm your exact offer. We also help you with any other questions you may have about your lender adviser, time to funding, and so forth. The term sheet includes compliance and privacy disclosures which we ask you to read and agree.
Signing the term sheet is an easy, fully digital (Verisign/Echosign) process based on industry-standard DoD-level security which allows you to sign off with just two clicks. Clients automatically receive a signed PDF copy upon completion, and are from that point ready to receive a Welcome email from their licensed lender adviser at their lending institution. The Welcome email includes all account-opening documents for review, the adviser’s FINRA and licensing credentials, and the adviser’s contact and licensing information for background checking prior to the introductory conference call.
The conference call marks the point where you as client will commence working directly with your licensed lending institution and adviser. If you choose to proceed, your account will be opened for you, the securities you wish to populate your new brokerage account will be brought over with your permission, and your loan agreement – if you wish to proceed – you will sign. Your line will be open for wire or check in about 24-48 hours via a linked bank account.
Your collateral stock portfolio requirements: all securities within your portfolio should be worth at least U. S. $85,000 at the time you apply, and cannot be inside an IRA or 401k. The securities within the collateral portfolio should be trading at $5/share or higher. As a rule, multi-stock portfolios are always preferred. Your securities should be free-trading, and if you have a margin on them already, that is not usually a problem as your lender can pay this off for you in advance.
You may use any combination of stocks, bonds, mutual funds, cash, or other eligible securities or cash. All cash positions must be greater than $100K for eligibility.
We cannot use IRAs or Keogh Plans for our securities credit line, but we do have a retirement rollover program that can free cash for investment in a business or franchise.
In some cases pre-IPO stock can be used as collateral too, and LeverageLine can be cross-collateralized with other assets such as real estate for a special LeverageLine construction. Inquire if this is your situation.
Apply via our secure application form at https://abnicholas.com/quote.
Your term sheet is delivered electronically via a secure, Verisign/Echosign system which allows downloading of a PDF copy and signing with two clicks.
View our Process page for more detailed information on our easy, secure application procedures.
We welcome your calls and emails at any time; if you call and leave a message after business hours, we will get back to you the next business day.
You can reach us between 9AM and 8PM Eastern time, Monday through Friday, and 10AM to 1PM Saturday at 202-379-4744 ext. 1 (ext 2 for administrative matters); or via our secure contact form at any time. We respond to all inquiries promptly.
Organizations that would like to be partnered with A. B. Nicholas can contact us at the above coordinates. (View our partner page).
— are single-stock based for call purposes
— are often more expensive
— do not allow deduction of your line’s interest paid against business income*
— cap at only 50% loan-to-value for equities (stocks), and
— have very strict call policies.
In addition, margin loans — known as “purpose credit loans” — are intended primarily for the purchase of more marginable stock, not for other purposes.
Margin loans are “purpose” credit loans by definition, designed for the purchase of additional securities as their main purpose. The maximum loan-to-value is 50% for stock portfolio use and they are designed for the purpose of leveraging your brokerage’s cash into additional securities and thereby to increase your opportunity to profit from their appreciation by deploying more buying power.
LeverageLines, by contrast:
— are multi-stock-based for call purposes
— are far less expensive
— may allow deduction of your line’s interest paid against business income*
— have no set loan-to-value cap for stocks or other securities
— have very client-oriented call policies with multiple cure options
LeverageLine is a “non-purpose” securities portfolio-based credit line (stock loan) that is intended for any purpose other than the buying of more marginal stock. It is a wholesale facility customized for the franchise, business acquisition, and commercial real estate with many features designed to benefit these markets.
A LeverageLine is therefore cheaper, faster, more flexible, and tailored to the long-term needs of the specific markets we serve. It is the end result of a rigorous process of locating licensed advisors within major licensed institutions willing to offer the no-title-transfer, no-sale-to-fund model that our specific type of client requires.
Our lenders, in addition to understanding our clients’ specific needs, hope that our clients may become clients for other services later, including conventional business credit lending or other brokerage services.
*Do not undertake any tax decision without consulting a licensed tax professional in advance.
Stocks, bonds, mutual funds, ETFs, non-corporate bonds, and most other unrestricted securities trading on any major U. S. exchange at $5 a share or higher. (See international cases for non-U.S. stocks).
We can also provide financing against selected pre-IPO stock with proper registration. For cross-collateral transactions, eligible securities plus real estate, or selected high net worth assets can be grouped into a single credit line. Both pre-IPO and cross-collateralized transactions are handled on a case-by-case basis. Inquire or call us (202.379.4744) first before applying and we will review your assets to let you know if they are eligible. As always, all financing offered via A. B. Nicholas is exclusively through fully licensed, U. S.-based institutional lenders only.
We do not accept medium-term-notes (MTNs), letters of credit, foreign bonds, real estate/mortgage-based bonds, or securities that are in an IRA, 401K or Keogh plan as collateral for the LeverageLine program.
For more information on securities requirements, please visit our eligibility page.
Yes. For LeverageLine clients you are unlikely to notice anything different between your existing brokerage and your new lending brokerage, including online access, research tools, and reports on demand.
You are basically just changing your custodial account for the sake of obtaining custom wholesale LeverageLine terms. Our partners offer higher-end online trading tools as well if you wish.
If your securities portfolio grows, the maximum credit that you may draw from the line can increase along with it. You may request an increase in draw/line release if your portfolio should show the requisite consistent/stable growth.
Although the increase is not automatic, if the portfolio as a whole shows consistent and sustained growth over time (not just a short-term or temporary flux), your higher credit authorization is likely to be approved. Simply contact your licensed lender advisor to request an increase. If the increase is clear and sustained, the request will be approved.
No. There is no penalty for early payoff, and you have no requirement to keep your credit line in place if you own nothing on your line.
Our standard LeverageLine is a revolving line of credit and you may prepay (pay off) your outstanding principal any time you like with no penalty of any kind. You may also pay it down by any amount at any time. Payments can be set to automatic. If your securities generate substantial dividends, you can direct these dividends to count against any accrued interest or principal if you wish.
Note that you are not charged anything by your lending institution if your balance is zero. All wires are free.
No. A. B. Nicholas has required that its clients have no mandatory account management fees as a precondition to funding; this is a fundamental feature of our program.
This can mark a significant savings to our clients, as these fees can range as high as 4% per annum depending on the program and institutions. A. B. Nicholas clients pay zero, unless they choose professional account management. If so, the rate will be between 0.75 and 1% per annum – a discount of up to 65% or more over what most advisors charge – because you are an ABN customer.
A. B. Nicholas developed this particular custom facility and we charge a fee based on the maximum line we will have worked to arrange for you. This fee is due only after your line of credit is open, in other words, when we have delivered as promised and agreed. Clients who would like a discount on the fee may opt to pay before their term sheet expiration date for a 10% discount. Both options are clearly stated on your term sheet.
For fee-related questions, please write us at email@example.com or call Marie Wood at 202.379.4744 Ext. 2.
Credit may be pulled for your LeverageLine, but primarily only to verify identity. It is NOT used to determine your loan terms.
Your loan is not reported to credit bureaus (unless you wish to put your loan in your business’s name and build credit for it).
Credit is therefore only pulled to verify identity and to ensure there are no catatrophic issues (foreclosure or bankruptcy within last five years).
Credit is therefore not a factor in your LeverageLine financing unless you are teaming your LeverageLine with a custom lending structure that would require credit.
As always with taxes, consult with your licensed Certified Public Accountant or other licensed tax professional for verification of tax treatment of your LeverageLine stock portfolio loan interest.
LeverageLine is a “non-purpose credit” form of financing, unlike a margin loan, which is a “purpose credit” type of financing under federal regulations. In simple terms this means that your LeverageLine credit line can have higher loan-to-value (95% or even higher), usually lower interest, and the interest payments on your LeverageLine may be deductible against income earned from a franchise, business, or commercial real estate project that you place your loan proceeds into. This is a general statement; do not assume deductibility without consultation with your licensed tax professional in advance.
By contrast, a margin loan is capped at 50% loan-to-value for stocks by regulation, often involves much higher interest rates, and interest generally may not be deducted against income from your franchise or commercial real estate venture. (Consult with your licensed tax professional to verify for your case).
Example: Let us say you’ve paid $15,000 of interest on your LeverageLine for the year. You have put most of your loan proceeds into buying a new franchise that had business income of, let us say, $100,000. If your tax bracket was for example 30% and you had no other means to deduct, you would probably be paying 30% of $100,000. Your tax bill all things being equal: about $30,000.
But if you had a LeverageLine, and assuming you have verified deductibility with a licensed tax professional, for the same example your taxable amount would be the same – $100,000 – but because your interest would now be deductible against business income, so you’d pay on only $85,000, not $100,000. Thus, your tax bill with LeverageLine would be 30% of $85,000, or $25,500, a savings of almost $5,000.
Again, the above example is for illustration only: remember not all cases are equal and there are often unique and extenuating circumstances that can affect the end result. Always consult with your licensed tax advisor before making any tax-related decisions involving this credit line program.
Yes. Your current financial adviser can place trades with your new lending brokerage’s adviser provided that the trades do not negatively impact the value of the collateral (the portfolio value) while it supports your credit line.
You may direct your adviser’s annual fee to be paid from your line, too, at no charge if you wish. Your LeverageLine lender’s goal is to become your financial partner in whatever capacity that may be, and if that includes cooperation with your existing financial adviser, he will be happy to do so.
Remember, however, that how he/she is compensated depends on you the client. Your lender can send payments from your LeverageLine credit line account to your existing advisor say, quarterly if you direct, but that is up to you.
Our lender advisers are happy to speak to your current adviser. However, note that your current adviser might not be permitted to act in that capacity, which would be out of our hands.
Yes, with qualifications. Certain foreign (international) free-trading securities are accepted if trading at $0.50 cents/share in U. S. dollar equivalent and the portfolio size is at least $1 million in value. The transaction is initiated through the New York branch of the top-tier, fully licensed major brokerage/bank that offers this facility for our clients.
Except for the fact that the securities must be in an account in New York, the loan program is identical to LeverageLine.
Please see our page listing foreign and international eligibility. Non U. S. citizens are accepted. Only stocks and cash are acceptable, and you must provide not only brokerage statements and ID (passport preferred) but also the website location of the securities to be used as collateral for information on the valuation of the securities. Other verification information may be required, as application process proceeds.
Use our standard quote form to apply for non-U.S. securities financing.