If you are an investor and you are in need of financial assistance or you want to tap the value of your portfolio without having to sell your investments, then stock-based loans are ideal for you. Investors need to ensure that the lenders they are requesting for stock-based loans are registered and regulated by the financial regulatory authority since taking loans from unregistered, unregulated third party lenders can be risky. It is vital to choose a registered and licensed lender of stock-based loans since failure to do this may result in unintended tax consequences.
In stock-based loans, a legal title of a security is temporarily transferred from the lender to the borrow. In addition, the lender retains all the benefits of ownership except the voting right. On the other hand, the borrower is entitled to use the securities as required however, he will be liable to the lender for all the benefits such as dividends, interest and rights.
Before you think of getting stock-based loans, you need to know the parties who market these loans. Stock based loans can be marketed by financial planners, investment advisers, insurance agents, accountants, attorneys and others.
It is recommended for businesses that want to request for non-recourse stock-based loan program operate. It is worth noting that stock-based loans come in different features based on the type of lender on chooses. The type of stock that an investor chooses to act as a collateral is not the same with that of other investors.
The other benefit of stock-based loans is that it provides the borrower with many options once the loan period ends. The following are the options that a borrower have at the end of a loan period.
If allowed, a customer can renew the loan for an additional fixed time period. Alternatively, a borrower can decide to get back his stock once the loan period ends after they have paid off the loan balance.
The other option that a client has once the loan period comes to an end is to choose to get a cash payment that is equal to the profits. However, for a client to get a cash payment, the value of the pledged stock need to increase above the total amount due on the loan.
Companies that have borrowed stock-based loans also have the option of walking away after the expiry of the loan period; this happens when the value of the stock they pledge is below the amount the companies owe. When you are looking for a stock based loan investor, you need to ask family members, friends, and colleagues for referrals. By following the tips, you will be guaranteed of getting the stock based loans lenders.