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One of WJM 7's hottest products is a securities-based loan. These loans allow someone to get money at incredible rates with no verification of income, credit, etc. There are no strings attached on the money and you and your clients can use the program for anything. All you or your clients need is a substantial amount of assets in stocks, bonds or treasuries.
• Developers can use the funds to initiate or to finish construction projects.
• Small businesses can use the proceeds to keep afloat until the economy turns.
• Business owners who are overleveraged with maxed lines of credit, liens and liens on receivables can use the proceeds pay off high interest debt.
• Business owners can us the proceeds to expand their business or purchase other businesses.
• Funds can be uses to purchase a company car or a fleet of cars.
A proven and straightforward process built around your needs
We understand that you’re a forward-thinking investor who wants to retain the future ownership of your assets. But you also want to leverage the present value of your securities for your immediate cash needs. That’s pretty straightforward.
The program was designed for a forward-thinking investor who wants to retain the future ownership of their assets as well as leverage the present value of their securities for immediate cash needs. The program could be a perfect fit for you because our clients can use the proceeds for any purpose (with the exception of additional marginal securities). |
Flexible and Secure
Our partner is a private lender, so we handle our own underwriting to totally control the loan process. This gives us the freedom to make the process personalized to meet client needs. We take pride as one of the few securities lenders in the industry to consistently return the borrower’s position in full when they stay within the covenants of the financial instrument.
This should give you confidence that you are partnering with an established, knowledgeable, and trustworthy securities lender. |
Low Interest Rates
Compared to traditional loans and margin accounts, our securities loans carry a lower interest rate. These are very competitive, simple fixed interest rates which are noncompounding.
Current rates range from 3 percent to 5 percent, depending upon the quality of the pledged assets. |
Benefits of the Program
- The terms--up to 80 percent LTV and 4 percent rate.
- The program is non recourse.
- We will provide financing where banks will not.
- Much better than a margin loan--margin loans only go to 50 percent LTV, variable rate between 6 and 9 percent, many stocks are not marginable, etc.
- The funds can be used for any purpose.
- Borrowers don't want to sell their stock and incur a taxable event.
No maximum loan amount |
Honesty and personal attention
We are committed to carrying out each step of the funding using a straightforward process. Giving you all the facts up front, working with you one-on-one, having the flexibility to meet your needs, and providing clear and constant communication are fundamental to how we service each client. The end results are:
- You benefit from our experience in financing simple, low-cost securities loans.
- You gain all the advantages of a totally customized, low-rate financing package.
- The same amount of collateral is returned to you at the end of the loan term.
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Advantages over Conventional Margin Loans
The program is an excellent alternative to Margin Lending, which is currently offered by Merrill Lynch.
Merrill Lynch’s program is not as advantageous because:
- ML offers up to 50% of market value (my program has a higher LTV, up to 80%)
- ML’s rates are higher
- ML offers variable rates
- ML’s loans are recourse
- ML can’t finance stocks below 10 dollars a share
A securities loan is not a margin account. These loans have significant advantages over conventional margin loans. |
Examples:
- One deal we have working is a developer who was building a hotel and was half done when the bank got taken over by the FDIC. Because it is half way through construction, there is not a lot of interest among other lenders to get the hotel completed. But he has $7 Million in his stock portfolio. We can get him a quick $5 Million and he can finish out the hotel and get it open.
- Business owner had a $2mm loan on his business assets that was coming due. The bank holding the note wanted 8% and 3 points to refinance—with recourse. A securities based loan was done instead at 4%. This resulted in a savings of $80,000 a year.
- Developer wanted to finance the purchase and development of raw land for $8mm. Bank would only offer a 40% LTV, rate of 8.50% and 4 points. A securities based loan was done at 68% LTV and a rate of 3.75%.
Sample Loan
Borrow funds by using stock as collateral: Here’s a straightforward example of a stock loan process, including how the “strike price” and value of the loan are determined.
- Stock owned: 10,000 shares of ExxonMobil (U.S.: XOM)
- You pledge 10,000 shares of ExxonMobil for loan.
- We offer you a loan-to-value ratio (LTV) of 70 percent.
- After accepting the terms, you transfer 10,000 shares to our brokerage account.
On the day the 10,000 shares clear and post to EFH’s account, the closing price for XOM (as reported by Bloomberg™) is $72.90.
- The closing prices for XOM on the next two business days are $73.10 and $72.76.
- The average of these three consecutive closing prices is $72.92 ($72.90 + $73.10 + $72.76 = $218.76 / 3 = $72.92). This is the “strike price” for this loan.
- The total value of the pledged collateral (for purposes of determining the final loan amount prior to funding) is $729,200 (10,000 x $72.92).
- The loan amount is 70% of $729,200 or $510,440.
- During the pendency of the loan, we will sell all or the majority of the stock (upon full repayment of the loan, we will take all necessary steps to reacquire the collateral for return to the borrower).
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