What is Stock Loan Lending? Stock loan lending is the process of loaning a stock or share security to an investor, person or company. Stock loan lending is where the borrower pledges a basket of shares or pledges a stock security that is listed on a mojor stock exchange anywhere in the world. When a listed security or stock title is loaned the title and the ownership are also transferred to the borrower as they have put up cash which is lent to the financial investor against their exchange listed and tradable financial securities. Understanding Stock Loan Lending Securities loan lending is conducted between stock brokers, stock dealers, stock selling instititions and not usually by individual share trading investors. But today times have changed and financial times have developed as there are many individual stock market investors that hold a majority of their savuings and wealth in stocks and shares and so require a stock loan to finance other financial asset purchases at the drop of a hat timewise. This released capital can be used to finance, propert, art purchases, jewellery and even classic and rare cars and vehivles at auction. In short the equity releseed thats being released by the stock holding client from stock lending providers can be used for any financial purchase as the investor has pledged their stocks and shares as collateral to obtain access to their equity held in their share portfolio. In short stock lenders are basically asset backed based lenders. To complete the stock loan, a stock loan lending agreement, known as loan agreement, must be completed. This lays out the terms of the stock loan including term duration, interest rate, lock in period, lender’s fees and the description of the collateral loan. How Does A Non-Recourse Stock Loan Work? Non-recourse stock loans are a loan secured against shares in a publicly-traded company to secure the loan financing. It is an easy and efficioent way for individuals, instititutions, large well capitalised comapnies and business owners to acess the value of their stocks and shares without much fuss and without having to wait too long for the money. Stock loan lending can be a critical capitalisation source for entrepreneurs wanting to use this money to expand their business or to even plug a temporary hole in their cashflow. A stock loan is a great financial lending resource they can use to gain quick access to fund their business operations. Stock loan amounts are usually determined by a loan to value (LTV) ratio which means the loan amount may be equal to 60% of the value of the shares needed to secure the loan. The LTV is usually determined by the strength of the stock and by what volume is trading each month. The stock must have a minumum trading volume which is is at least 250,000 shares must be traded oer an average of 30 days. This enables the stock loan lender to exstablish how much they will lend the applicant looking to loan money against the shares in their portfolio.
There is a lot of different angles to the lending criteria, the maximum loan amount available to a borrower can depend depends on factors such as: Stock Market conditions Historical shares and stock prices and volume performance Total number of shares owned by the investor or company looking for the loan Market sector sentiment in the current investment climate Why Would companies or Investors Need A Stock Loan? The companies or investors ability to convert a portion of the current stock market market value of securities into cash without selling them outright is an extermely attractive option for many shareholders without haing to actually give up their shares. With that euity unlocked from their stock portfolio hoding, individuals and business owners can access the liquidity they need with ease and without visiting the bank. Banks dont tend to offer stock loans to companies as they would to large institutions and this is where the private institutions step in to fill this gap in the market. What Are The Benefits of Taking a Stock or Securities Loan? Interest only payment option — No ambiguous or hidden charges; stock loans are an interestonly transparent loan option. There are no never-ending charges that seem to extend the credit unnecessarily. Accessible — Stock loans are available to almost anyone but mainly to institutional investors and company owners. You don’t need a credit check to access one for your individual or business needs. The process is painless and straightforward, and your money is delivered to you most conveniently. Stock Loan Liquidity — Stock loans are a fantastic easy option when an individual or business owner needs fast stock financing option to release equity. It turns equity into cash with a lot more ease than banks can offer. Lender Privacy — It provides borrowers with a trustworthy source of capital and all transactions are private and kept in strict confidence. Competitive Pricing— Stock loans offer you competitive and flexible interest rates usually less than 3%. You typically receive better terms than you would get from a traditional bank loan as the lender has your assets to lend against. The lender can liquidate these in the case of a default. Stock Loan Application Process Within 24 hours of contacting the stock lender an Agent will contact you to review the stock and eligibility for a loan.
If approved, they will consult with you to determine a customized solution that works best for you. A non-binding Term Sheet will be sent to you outlining the details of the loan such as loan amount, interest rate, fees and loan term. Once the Stock Loan Term Sheet is approved by you a Non-Recourse Stock Master Loan Agreement and Stock Pledge Agreement will be prepared based on the 3–5 day average of your stock’s price and sent to you for review and approval. A current stock brokerage statement or share trading statement will be requested as proof of ownership and status of the securities prior to TERM SHEET and funding. The loan funds are disbursed either via DVP (Delivery Versus Payment) or wired into your bank account. You can make interest-only payments monthly, quarterly or semi-annually. Any dividends from the securities are credited to the loan payment first and any excess is returned to you. At the end of the loan term loan if all interest payments are made and the portfolio has maintained the required LTV, the same amount of shares originally pledged are returned to you. The loan term may also be extended or refinanced for an additional term and LTV based upon market conditions. The time frame from start to funding may be as little as 7–14 business days. Common Stock Markets That Shares Can Obtain Stock Loans-Country Exchange Exchange Abbreviation Athens Athens Stock Exchange ASE Australia Australian Securities Exchange ASX Canada Canadian National Stock Exchange CNSX Canada Toronto Stock Exchange TSX European Union EU NYSE Euronext NYX Germany Frankfurt Stock Exchange FWB Hong Kong Hong Kong Stock Exchange HKEX Indonesia Indonesia Stock Exchange IDX Japan Tokyo Stock Exchange TSE Malaysia Bursa Malaysia KLSE Philippines Philippine Stock Exchange PSE
South Korea Korea Exchange KRX Singapore Singapore Exchange SGX Thailand Stock Exchange of Thailand SET Turkey The Borsa Istanbul BIST United Kingdom London Stock Exchange LSE