Alternative Financing Solutions
Whether you’re a real estate investor, developer or contractor, you know how important
it is to have capital available to take advantage of key opportunities particularly
when you need to act quickly. Of course, the size these capital expenditures usually
requires financing, but often long approval processes, high interest rates, prepayment
fees and the amount of capital need may stand in the way of getting financing, when
you need it.
We understand true financial success means balancing and effectively managing both
assets and liabilities. That’s why we offer alternative financing solutions to pursue
your real estate investment needs and fit your financial growth plan. One solution
is securities based Premier Credit Line.
With securities based financing. You pledge your eligible securities as collateral
for your loan. With a Premier Variable Credit Line or Premier Fixed Credit Line
(or a combination of both), you can enjoy the benefits of:
Convenience
Easy application process with timely decisions, as well as the ability to lock in
your interest rate for up to 5 years.
Cost
Competitive rates based on LIBOR (London Interbank Offered Rate) with no points
or closing costs. Plus there are no fees associated with Premier Variable Credit
Line.
Flexibility
In addition to your real estate needs, a Premier Credit Line may be used for almost
and purpose, other then to purchase, trade or carry securities.
For a real estate investor, developer or contractor these benefits translate into
being to respond to opportunities quickly and efficiently. And since a Premier Credit
Lines uses your securities portfolios as collateral, you have access to funds and
liquidity, while maintaining your portfolio’s current exposure to the market.
Ready For Growth
With a Premier Credit Line, funds may be available for you to draw on as real estate
investment opportunities arise. This gives you the ability to put your loan proceeds
to work for a variety of uses:
- Investment Properties
- Vacation Properties
- Raw Land
- Special Use Properties
- Construction
- Equipment and Other Capital Expenditures
- Short Term or Bridge Financing
- Expansion, Renovations and Remodeling
- Refinance High Interest Debt to Free Up Cash Flow
What is Securities Based Lending?
Securities based lending is generally a revolving line of credit that uses your
eligible investment portfolio.
In order to establish securities based loan, your portfolio is pledged to a lending
institution, as collateral. This gives you, the investor, the ability to access
liquidity while maintaining your portfolio’s current exposure to the market.
You will continue to receive the benefit of any dividends, interest or capital appreciation
that may accrue in the account. However, if a borrower has an outstanding loan balance
and the portfolio used to secure that loan declines in value, the lending institution
may require the borrower to post additional collateral or repay part or all of the
loan. The lending institution may also liquidate all or part of the portfolio.
What is Non Purpose Borrowing?
Loans that are provided by lenders, such as banks and brokerage firms, must be classified
as either purchase or non purchase, as directed by the Federal Reserve. A non purpose
loan may not be used to purchase, carry or trade margin securities. Some uses for
a non purpose loan include.
- Paying Your Taxes
- Refinancing High Interest Non Purpose Debt
- Financing Business Opportunities
- Funding Higher Education Expenses
- Purchasing a Luxury Item
Non purpose borrowing against your investment portfolio affords a number of benefits
not available with traditional margin borrowing. While a margin loan must be drawn
in the same account where the eligible securities are held, a non purpose loan is
held in a different account; thus, multiple asset accounts may be pledged to secure
one non purpose loan.
This structure is particularly useful situations where multiple parties wish to
secure a loan for a single borrower, for example, business partners securing a business
loan for their company. In addition, there are often higher borrowing limits or
release percentages against the value of the
securities when they are used for a
non purpose loan.
How Much Can I Typically Borrow Against My Portfolio?
The lender evaluates each security in the investment account used to secure the
loan. The lender then determines how much it will loan or “release” against each
security, while also talking into consideration the entire mix of the portfolio
and other risk factors. For instance, a portfolio that contains a single stock position
may not receive as high a release percentage as a diversified portfolio, based on
the overall risk of the investments.
Financial institutions may lend up to 50% of the market value of an equity position
as a margin loan. However, if you’re borrowing for a non purpose use, you may be
able to borrow up to 70% against the value of your equities in your eligible securities
account. Bear in mind that the more you borrow, the higher your leverage will be,
resulting in increased risk should your securities decline in value.
What Types of Loans Are Typically Available?
The terms and/or types of loans will vary by lending institution; however, in general,
these loans are non committed, demand facilities with either a fixed interest rate
for a period of time or a variable interest rate.
Fixed Rate Loan
A fixed rate loan means you borrow a defined amount of money for a fixed period
of time and for a fixed interest rate. This is commonly referred to as “locking
in a rate.” Once you draw upon your loan, you agree that it will remain outstanding
for the entire agreed upon term, whether it is 30days, 3 months or even years, Should
you decide to pay down the loan before the expiration of the term, most lending
institutions will charge you a termination or prepayment fee.
Variable Rate Loan
A variable rate loan means the interest rate you are charged on the money you have
borrowed is not fixed for any given term. Rather, it fluctuates on a daily basis.
This can be to your advantage or disadvantage, depending on fluctuations in the
loan’s underlying index.
How Are Loan Interest Rates Usually Determined?
Your interest rate is made up of a base rate and a spread. Two commonly used base
rates are the Prime Rate and LIBOR (London Interbank Offered Rate)
For Whom Is Securities Based Lending Appropriate?
A securities based loan may be an attractive alternative to traditional borrowing
for an investor who wants access to borrow for a non purpose use. Since there is
risk involved in the type of a strategy, you should consider securities based lending
only if you are risk tolerant.
Would you like to learn more or receive more information?
Request more information now.
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