Security Backed Loans
Overview of Security Backed Loan
- ➤ A Security-Backed Loan (“SBL”) is a loan collateralized by shares (“Collateral Shares”) of a publicly traded company stock, which can be a useful tool for short or long term borrowing needs.
- ➤ Shares can be traded on many major markets such as: Hong Kong, South Africa, Singapore, London, Mexico, Vietnam, Indonesia, Korea, Italy, Philippines, etc.
- ➤ SBLs are a simple and effective financial instrument that allows the Borrower to maintain a position in the market (no need to sell stock), while creating liquidity to meet an immediate monetary goal.
- ➤ Because of the non-recourse nature of our loans, clients are able to use this product not only as a low risk source of liquidity, but it can also be used as a hedging tool to protect gains in the value of the equities being offered as collateral.
Key Points
- Broad Winds' loan structures offer a wide range of benefits, including some notable difference from those offered by banks, securities brokers and other counter-parties:
- ➤ Non-recourse (i.e., no additional personal assets need to be pledged as security/borrower´s risk is limited to the collateral shares).
- ➤ Loan amounts can range from under $1M USD to over $100M+ USD per tranche.
- ➤ No margin calls.
- ➤ No Short Selling.
- ➤ Broad Winds able to accept a wider range of stocks including micro-cap/small-cap shares as collateral.
- ➤ LTVs typically ranging from 40% to 70%.
- ➤ Loan terms can range from 24 to 60 months.
- ➤ Fixed annual interest rates typically below market rates (3% to 7% per annum).
- ➤ Ability to retain upside market appreciation.
Security Backed Loan – Process & Timeline
Anticipated Process Timeline
Week 1:
➤ Borrower submits inquiry for loan by providing a stock symbol, number of shares to pledge and target loan amount. Lender determines the viability of the loan, and calculates a loan-to-value ratio (LTV), duration and the interest rate, based on an assessment of both short and long term risks.
➤ Lender issues a term sheet to borrower. Terms are negotiated & finalized. Borrower signs term sheet, completes questionnaire, and sends copy of passport and brokerage statement to lender.
Week 2:
➤ Lender receives Term Sheet and sends contract to borrower for review.
➤ Final contract is negotiated & signed.
Week 3 & 4
➤ Borrower opens brokerage account at lenders designated brokerage firm.
➤ Both parties coordinate a delivery date with their respective brokerage firms for delivery of collateral.
➤ Once lender has been notified collateral has been delivered, the loan is funded according to the loan agreement.