Benefits of Securities-Backed Loans

Investors with a diverse portfolio have quick access to loans through securities-backed lending. Securities-backed loans and related lines of credit can be very helpful for investors who have to make big purchases every now and then, such as acquisition of private entities and purchase of prime real estate properties. Remember that this term is different from ‘securities lending’, wherein a brokerage provides securities to traders so that they short sell stocks and/or other assets.

Also known as securities-based lending, securities-backed lending employs securities as collateral to approve loan amounts for investors.

How Securities–Backed Loans Work

The investor may have a diverse portfolio of bonds and stocks. These can serve as collateral to provide security on amounts appropriated as loan.  The borrower will deposit the required securities into an account upon which the creditor exercises a lien. The lender will then release a loan amount which is a certain percentage of the market values of the securities that have been deposited. The percentage varies according to the specifics of the deposited securities and the extent of diversification of the portfolio. In general, the lower the risk on securities, the greater is the percentage of the loan forwarded. For instance, the lender will release a larger percentage as loan on a portfolio of US Treasury notes as compared to a portfolio that is restricted to a concentrated and single stock position.

In order to access the loan amount, the borrower must write a check corresponding to the line of credit or forward instructions to wire the amount into a specified bank account. It is important to note that the value of the collateral will fluctuate according to the market conditions. Since the loan amount is specified as a fixed percentage of the collateral securities, the amount of money that can be withdrawn as loan will vary. So if the securities are now worth a lower amount, the loan will be smaller. In order to withdraw a larger amount, it will be necessary to deposit a larger amount of securities as collateral.

Cure Period

The ‘cure period’ ranges from 2 days to 30 days. It is the time period after which the lender can liquidate the securities being held as collateral to recover the loan amount.

Eligibility

Individuals and joint investors are eligible for securities-backed lending along with revocable living trusts where the trustor, trustee and beneficiary are one and the same.

Advantages for Investors

These loan types have several benefits. The borrower can enjoy reduced interest rate and lower risk compared to other types of loans like a margin loan. Securities-backed lending also has much higher flexibility for repayments and offer the cure period to allow the investor to deposit further collateral. This is in sharp contrast to the immediate payback requirement of a margin loan.

Diversity of the investor’s portfolio will generally result in a lower interest rate.

KLB Business funding offers the nation’s only non-transfer of title securities-based loans. You can obtain a loan as high as 90 percent of the collateral with no restrictions on the purpose for which the loan is used. You will maintain complete ownership rights over your portfolio. The interest rate can go down to an incredible 1.6%.

To find out about more great benefits, contact KLB Business Funding today:

3702 Pratt Avenue Bronx NY 10466

(347) 755-2257

info@klbbusinessfunding.com