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

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

Why Obtain Agent Certification?

Every registered Agent with A. B. Nicholas is required to obtain Compliance Certification to receive fees on any transaction they refer to the A. B. Nicholas LeverageLine program. What does certification do for you otherwise?  Certification gives you legal protection. Your test scores and your certification certificate are kept on file at A. B. Nicholas to prove that you have not only take the training course but passed the exam.

What Makes an A. B. Nicholas Stock Loan Better Than Others?

I’ll get right to the point.  Our rates beat anything you can get from any retail brokerage or bank.  Our loan-to-value is the highest in the market.  There is no change of ownership, nor sale of a single share required for this simple asset-based securities portfolio credit line.  Your loan is entirely, 100% managed by an accomplished FINRA-registered, licensed advisor from the major household-name brokerage/bank that services your loan program. 

Reminder: April 15 for Turning in New Agent Agreement to ABN

April 15 (tax day) is also the deadline for any existing Agent signed to our old agreement to have their new Agent Agreement signed and on file with A. B. Nicholas.  Any pre-existing Agent who has not signed by that date, will be removed from the Agent portal and resources and will need to reapply in the future as a new Agent applicant if they should seek to refer clients

Join Our Weekly Newsletter

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