Securities-Backed
Financing

Stock loans, Repo transactions, and block trades provide immediate liquidity solutions

When equity is tied up in publicly traded securities, you have few options apart from selling the securities to generate liquidity. Large single or multi-issuer shareholders generally cannot sell their securities in bulk, leaving them with few options for on-demand liquidity. 

Securities-backed financing offers a family of products and services and allows such clients immediate access to liquidity up to 70% of the value of securities, in as little as 14 days. Other features of these products include:

• Locked-in cash value to offset market volatility
• No restrictions on use of cash proceeds
• Loans and transactions are not dependent on personal credit and require no personal guarantees
• Securities can be non-marginable and can include stock from recent IPOs and stock that routinely trades for less than US$5.00 per share.
• Borrowers can elect to not repay the principal and simply walk away from the loan by forfeiting the collateral.

Repo Transactions features

REPO transactions give sellers an opportunity to liquidate’ a single block of publicly-traded securities at a discount, with an option to repurchase securities at a later date at the same discount, less the agreed-upon interest rate. The REPO transaction features include:

• The seller must be seeking to sell a quantity of securities with an aggregate value of at least US$4,000,000
• For a stock to qualify for a REPO Transaction it must have a minimum 30-day average trading volume of US$300,000
• The funder will purchase qualifying securities for a discount of a least 30% of their current market value
• The seller has the opportunity to exercise a repurchase option during a set period of between 1 and 5 years at an equivalent discount, less accrued interest of between 4% and 6% 

Stock loans, Repo and block trade application, and funding process

The funders usually request’s similar information and reviews loan, REPO and block trade applications pursuant to a common set of evolution and underwriting standards:

• The Applicant identifies the underlying securities by trading symbol and exchange and specifies the number of shares that the Applicant proposes to include in the transaction. 
• The Applicant submits identification and other information, including banking and brokerage information, to enable firm to satisfy its regulatory obligations such as the Know-Your-Client (KYC) and Anti-Money Laundering (AML) protocols. 
• Lender determines, to its own satisfaction, that the securities meet all internal minimum trading and liquidity standards, that they are not restricted or encumbered in any way, and that they are in proper custodial format.
• If the Applicant is approved, Lender issues a binding agreement to the Applicant, who then reviews, signs and returns the agreement within a specified period.
• The Applicant transfers the securities, in electronic format, into an account at a custodian designated by Lender.
• Upon verification of receipt of the securities, Lender proceeds to fund the transaction per the terms of agreement
• For both securities collateralized loans and REPO transactions, the Applicant has an opportunity to recover possession of the securities at loan or transaction maturity date, either by repaying the principal balance of the loan or by repurchasing the securities at an agreed-upon discounted rate. Shares are returned within 3 business days of payment verification.