• Securities information is provided from the borrower.
(A recent monthly statement works best.)
• The loan-to-value ratio and the interest rate are determined by what securities are pledged. The more liquid and actively traded the securities are the higher the loan-to-value ratio and the lower the interest rate.
• A Term Sheet/Loan Commitment is then issued.
• Borrower reviews and approves the Term Sheet/Loan Commitment.
• A conference call is placed between the borrower and lender to answer any questions.
• The Pledge Agreement and Contract are forwarded to the borrower for signatures.
• The securities are then transferred to the lenders brokerage account.
• Lender tracks the closing price of the shares for 3 days to obtain an average price.
• The loan is then disbursed based upon the loan-to-value previously agreed upon.
• Borrower makes Interest-Only quarterly payments.
• During the loan term prepayment of the loan is not allowed.
• Any dividends from the securities are credited to the quarterly interest-only loan payment first and any excess is returned to the borrower.
• Default trigger is set at 80% of the loan amount ­ not 80% of the securities value like typical margin loans. For example: securities value of $1MM, loan of $800k, default trigger at $640k (80% of the loan amount). If the securities value fell below $640k the borrower could walk away from the obligation of payment of the loan and keep the original loan proceeds ($800k) or contribute cash or securities to bring the value back up to $640k. The borrower would forfeit the collateral. Unlike margin loans this is a non-recourse loan so there is no personal liability should a default on the loan occur.
• At the end of the loan term the loan is paid in full and the same amount of shares originally pledged are returned to the borrower.
• The loan may also be extended or refinanced.

The time frame for funding may be as little as 5-7 days.

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