Bridge Financing for Real Estate Property and College Tuition
Liquidity Need:
Real estate investment & education paymentPledged Collateral:
Concentrated stock accumulated over15 yrs. with company held at brokerage account and transfer agent
Loan Structure:
Variable rate stock loan
A client requested $1 million in total for tuition for his eldest son entering college and bridge financing for 2nd home. He had $3 million in Dow Industrial stock, a portion held at a brokerage account and the direct shares through a transfer agent. It was 2009 and the client did not want to sell his stock which he had accumulated with his company at low cost basis either as incentive bonus or exercise of options. The shares held at the brokerage were publicly traded while those held at the transfer agent were private or restricted stock in certificate form. He was gradually planning to diversify his position, but he did not want to the stock at such low levels nor lose the dividends from the stock. Even then, he was still going to contend with tax consequences.
With help from a financial advisor, the client decided to use a stock loan solution for payment of the tuition and the 2nd home. Using the stock loan, he was able to defer selling of his shares at an inopportune time while maintaining his dividends.
In 2010, after the stock rebounded, he was able to reduce a portion of his stock loan, but maintain the loan because of the low prevailing stock loan rate.
US STOCKLOAN Advantage
- Stock loan rate was lower than home equity line of credit and existing mortgage options
- Allowed for consolidating of public tradedshares and restricted shares to be used as collateral
- Monetized concentrated stock without selling stock at wrong time
- Allowed for stock to rebond and dividends to be retained
Business Expansion and Line of Credit
Liquidity Need:
Business line of creditPledged Collateral:
Marketable SecuritiesLoan Structure:
Fixed rate securities-based loan
An independent energy company in the exploration, acquisition and production of crude oil and natural gas needs to expand its operation quickly in North Dakota’s Bakken formation. Rather than going to the arduous usual business financing such as a commercial loan or equity financing, the company chooses to use a competitive rate securities- based loan and pledges its marketable securities. The company receives and 80% loan to value and is able to use purchase of equipment and enter in oil leases.
US STOCKLOAN Advantage
- Time-advantage need and avoided hassle of usual business financing process and loan covenants
- Obtain competive rate to existing alternatives
- Monetized concentrated stock without selling stock at wrong time
- Avoided having liquidating short-term marketable securities, would have incurred penalty charges
Concentrated Stock in Post Initial Public Offering
Liquidity Need:
Vaction home & diversification of concentrated positionPledged Collateral:
Concentrated StockLoan Structure:
Variable rate stock loan of $750K
High level executive of a technology company is concern about her shares represent a significant portion of her wealth. Though the company was growing rapidly, she worried about the event similar to the internet craze and the global financial crisis. She did not want to sell her stock but wanted to monetize to it to diversify as well as buy a vacation home.
Speaking with her financial advisor, she got a stock loan, borrowing against a portion of her holdings. She also discussed some equity risk strategy to protection her stock position. She then used the loan to buy real estate and gold and other investments.
US STOCKLOAN Advantage
- Time-sentive, simple, flexeibl loan
- Permitted diversification
- Monetized concentrated stock allowing for capital apprection
- Permitted equity risk management