Each loan is priced individually, but in general you can expect the following terms:
- Loan duration is typically three years with the borrower having the option to extend one or two additional years. There will be a lockout period of eighteen months, after which partial or full prepayments can be made.
- Interest rates generally vary from prime to prime pus one. Sub-prime rates can be offered. You make quarterly, interest-only, payments.
- Borrower retains ownership of stock at all times.
- This is a collateral loan - not a margin loan. There will be no annoying margin calls in the event of a price decline.
- Loan-to-value (LTV) varies from 35% to 80% depending upon the quality of the collateral.
- The loan is non-recourse and thus not personally guaranteed by the borrower. If the stock falls significantly in value, you have the option to walk away from the loan without adverse consequences.
- Since the transaction is a loan, not a sale, it is not subject to disclosure under rule 144. In the event of a default and the sale of the shares, a 144 reportable event is triggered.
Here's the simple process:
1) After speaking with one of our loan officers, you can usually receive a non-binding term sheet within 24 hours.
2) If the non-binding terms are generally acceptable, you simply fax in the signed term sheet along with some related information. Within 2 to 3 business days you will receive a detailed contract and allowed ample time to conduct any due-diligence you deem necessary. You are not committed to the transaction until the actual transfer of the shares.
3) Funding can occur in as little as 3 business days following the acceptance of the contract.
Click here for more information on a collateralized stock loan!