A LeveragLine is a custom credit line that uses your stocks, bonds, mutual funds or any other publicly traded securities as guarantee for a very competitive credit line designed especially for the real estate investor or franchise/business acquirer (though it may be used for any legal purpose other than the purchase of more marginable securities). It is not a margin loan, which is designed for single stocks, caps at 50% loan-to-value, and comes with high interest and many other conditions.
A. B. Nicholas has arranged custom terms with several top-tier institutions and selected advisors willing to provide the exact financing program our clients’ needed, with no mandatory lender-side fees, no sale of securities to fund the line, and full licensure plus many other features not normally a part of the typical retail brokerage or bank loan. Click here for more on our stock secured loan programs.
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.
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 also partner only with carefully selected, licensed, experienced individuals employed by the largest brokerage/banking firms in the country. These institutional lender-advisors 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 licensed Certified Financial Planners and/or Registered Investment Advisers in good standing, with unblemished FINRA-documented backgrounds. (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 advisors 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 necessary to go over any and every detail of the program and answer questions of all kinds. Our goal is your satisfaction..
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.
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.
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 based on its price history. Still, a call to shore up value, pay down your line, or restructure out of the falling-price stocks in your portfolio, even if rare, can happen at any time as with any stock transaction.
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.
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.
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.
A term sheet is detailed explanation of your credit line offer, a guaranteed offer to finance, 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.
All LeverageLine interest rates are variable rates, based on a discounted “house” rate (an institution-determined figure based on various risk and economic 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)
You may also opt for fixed rate financing if you wish, although the rate is usually higher. Inquire of your licensed lender advisor if this is of interest.
No. You will not 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. That said, obviously if you should default on your loan and make no acceptable repayment arrangements, the lending institution does have the right to sufficient securities to cover its loss of principal.
With your permission the securities you wish to use as collateral will move to your solely-owned, 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).
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).
With your permission, those securities that you wish to use to back your credit line will move to your new account electronically, 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. 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.
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.
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. However, we cannot take 144 Restricted stock, or stock held privately (as opposed to trading freely on a major market like the New York Stock Exchange). We do offer a credit line facility for UPREIT investors.
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 available, too. For organizations, webinar training sessions are freely available.
— 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.
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.
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 firstname.lastname@example.org or call Marie Wood at 202.379.4744 Ext. 2.
Yes. You receive a 10% discount on your fees if you choose to pay the fee before your term sheet expires.
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).