A Custom Stock Loan in the Form of a Credit Line
Our LeverageLine program is a credit line using your securities portfolio as collateral, engineered by A. B. Nicholas originally for the franchise and business acquisition client. Today, the program has proved to also be popular with real estate investors and others seeking the best rates and terms available in a securities-based line of credit.
It offers a number of advantages over standard margin loans and most other types of financing, including:
- Wholesale interest rates, below most other types of credit, below the rates for standard margin loans, and below comparable retail or mortgage funding in most cases.
- Rates based on 1) size of authorized credit line and 2) 30-day LIBOR in a revolving line of credit that can be converted to a term loan at any time, if desired, at no additional cost.
- Credit not a factor in creating your credit line, as long as there are no recent bankruptcies, major outstanding government debt, or recent foreclosures.
- Speedy delivery with a pre-approved financing Term Sheet same day in most cases.
- No change of ownership of your securities collateral. A simple background lien at your lending institution secures your loan.
- Very flexible: no mandatory lender-side account management fees and no interest charged until you draw from your line of credit.
- No sale of securities to fund your line of credit.*
- Interest only payments required; even these may be deferred if you leave some room on your line.
- Public, well-known institutional lender with experienced, SIPC/FINRA-member facilities and advisers.
- A personalized revolving credit line with no maturity date; principal paid anytime.
- Averages all securities in the portfolio to stabilize collateral.
- A simple lien on your account at your lender ensures lender’s interest.
- Online access, freedom to trade (provided overall collateral value is not diminished) and establishment of a financial relationship with a major institution that may be parlayed into conventional business credit in the future.
- Better Business Bureau rated A+ five years in a row.
Our program does not require you to transfer title or ownership to your lender before you are provided with your funding, although you do need your account to be housed at your lending institution. All activities are handled for you by your licensed lender adviser with your permission. The application and funding process requires no effort on your part, only your authorization.
There is no sale of your securities as a condition to funding, thus no potential taxable event occurs unless you yourself choose to sell your securities.*
LeverageLine clients come looking for great financing first — not professional portfolio investment management services. So those services (and fees) are optional when you apply through A. B. Nicholas, every time. This is usually not the case with typical credit lines on brokerage securities accounts.
And if you do want your account professionally managed? That option is always available to you through this program. The only difference is that you’ll get experienced, top-notch licensed account management services at a big savings over what standard management rates.
*However, as with any asset-based can, were you to default and make no repayment arrangements to make your lender whole, the lender would have the authority to confiscate and sell whatever number of shares are necessary. This process could involve a taxable event to the client if it were to occur.
All LeverageLine interest rates are 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 smaller increment based on 30-day (monthly) LIBOR at the top of the month. (See the 30-day LIBOR rate in any of the major financial sites, such as Bloomberg or Bankrate).
Over the past eight years this LIBOR add-on has ranged from .14 to .94. Thus if the base rate is 2%, and the monthly LIBOR rate was, say, .44, the interest rate for that month would be 2.44% applied to the entire balance (figure assumes client chose to take all $154K out; whatever is drawn and outstanding will be the principal). Divide this number by 12 to obtain the next monthly interest-only payment due.
Laying this example out in series:
- Portfolio Value: $200,000
- Loan to Value: 77%:
- Loan/Credit Line Value: $154,000
- Rate base (2%) + current monthly LIBOR (.44): 2.44%
- Annualized: 2.44% outstanding balance ($154,000) = $3,756
- Divided by 12 for amount due: $313 due this month on $154,000 loan.
- You have in this way obtained cash without a taxable event.**
You can read more about the application process here.
Get a free, no-obligation term sheet today. Let us show you what you qualify for and we can discuss your options. Email us today.