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SOURCE OF DOWN PAYMENT/CASH TO CLOSE: Securities Loans - Stock Portfolio Lending

Basic parameters:

Minimum loan amount: $100,000
Minimum loan term: 3 years.
Maximum loan term: 10 years.
Minimum average trading actively on stocks: $50,000 per day. (Average volume x average daily trading dollar amount.)
There is no requirements for credit history, income, employment.
Non-Recourse loan.
Fixed rates.
Up to 80% LTV.
No Credit Reporting/No public records.
Flexible Terms available at Loan Maturity: The borrower may renew, refinance, extend, or pay off the loan.
Average Interest Rates are between 2.5 to 4.5%.

The rate & LTV are determined by daily trading volume, share price, volatility and dividend yield. The term of the loan may affect the interest rate.
Stocks with little trading volume are not as favorable as Fortune 500 stocks.

There is typically no restriction on the use of the loan proceeds, other than for re-investing in additional Stock purchases.

The holding company has full title on the stocks, but the borrower retains all beneficial interests including receiving any dividends, interest, market appreciation, or any other benefits that flow from the stock during the term of the loan.

So on a Dividend stock, for example, the borrower would continue to receive all dividends, however this is handled as, or is in the form of, a credit against the interest payment. Any excess income derived from the security is returned to the borrower.

Note two frequently asked questions: Is the transfer of the stock for the loan a sale? And, are there taxes associated with the transfer of the stock for the loan? All Borrowers should consult with a tax accountant to discuss the current tax law in this regard - this type of transaction is addressed in Internal Revenue Code ? 1058 which states that taxpayers who enter into a qualifying stock lending agreement receive non-recognition treatment with respect to any gain or loss at the time of the transfer of the securities. This section provides an exception to the general income recognition principles of Section 1001 of the Internal Revenue Code. This is a common transaction.

An answer is usually given within 1-2 days of submission. Closings average within two-three weeks - as little as 10 days. Funds can be deposited into the borrowers account in three to five business days once the contract is signed and the transfer takes place.

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