fbpx

The Role of Cash in a Securities-Based Line of Credit

A better stock loan... built by YOU.

Many of our clients come to us with a mix of securities and cash. On some occasions, they come to us with all cash. This is perfectly fine, of course, but it is important that they understand the mechanics of using cash for a LeverageLine.

The most important rule — and the one likely to cause the most misunderstanding — is that with a LeverageLine, we are not looking at the cash in a brokerage or bank account as part of the client’s “overall net worth” as might be the case with a mortgage or conventional loan, but rather as the collateral itself.

Put differently, the client is deploying their cash as collateral for the loan by having it converted to a money market fund, a CD, a stock, a bond, or another acceptable security or securities, usually. But clients may also opt to simply keep it in a money market fund earning interest — and still use it as part of their overall collateral, if desired. The licensed lending institution and adviser will work with each client depending on the client’s priorities and wishes when cash is part of the collateral base. Once turned into a lendable asset, it is treated just like any security for LeverageLine.

Please be sure your clients know that we will assume any bank statement sent will be sent to us because they wish to use it as part of their collateral for a LeverageLine. When used in this way (as collateral) it of course is no longer accessible for paying for other things without diminishing the collateral value.

Feel free to call 202.379.4744 Ext. 1 if you need more information on this subject; or contact us here.

Share on facebook
Facebook
Share on google
Google+
Share on twitter
Twitter
Share on linkedin
LinkedIn
Related Posts

Build Your Business with LeverageLine

LeverageLine came to the rescue for Joseph Wesson III, owner of a lavendar farm in Howard Country, Maryland. Mr. Wesson’s farm could not get its produce to market in time; dried lavender had to get to the consumer quickly to retain all the characteristics that make it a health produce for millions. But without the right trucking services, the crop will be lost and unsellable.  Wesson owned $1 million in

LeverageLine Builds an Entrepreneur’s Dream…

Marcy Tyler saw her first cycling race when she was only eight years old. At the time, the speed, acquiline form, and power of the cyclists had impressed her like a tsunami. From that day on, she committed herself to becoming a cyclist. And so she was, through high school, and her junior year of college. She even won the Indianapolis Swift Racers cup at age 21. Her collection of

Join Our Weekly Newsletter

We do not sell, communicate or divulge your information to any third-parties.