If recent statistics are to be believed, there is a rise in the use of margin and stock-based loans to meet working capital requirements. As banks have stiffened up their lending criteria to businesses due to the spiraling market conditions of the market, the industry seems to be moving towards a new substitute to raise capital that seems to be benefiting everyone.
This finding was brought to light by Al Christ Jr., founder, and CEO of EFH (Equities First Holdings). The whole concept of margin based loans and stock-based loans have different precursors attached to them. According to Al, loans that have been collateralized by stocks seem to have a higher loan-to-value-ratio offering a fixed interest rate to the borrower thus ensuring security to the transaction.
A borrower of stock-based loans can expect a fixed rate of interest which may vary anywhere between three to four percent throughout its lifetime. They are non-recourse which gives the borrower the option to walk away if the stick that has been used as collateral sees a decrease in its value. A margin based loans, on the other hand, has a precursor attached to it and the borrowers need to be pre-qualified and can only be used for a specific purpose, unlike stock-based loans. Also, the interest rates fluctuate and may vary from time to time within the lifespan of the transaction.
According to a leading business survey high net worth individuals (HNI’S) usually invest for three main purposes, the first being long term capital appreciation, having a steady current income comes next on their minds and the third reason is to diversify their investments. This great gap can be filled by non-purpose lending which is slowly selling like hot cakes in the market now and this is something to look forward to for HNI’s and businesses alike.
About Equities First Holdings
Established in 2002, Equities First Holdings is a private, non-purpose lender that provides alternative financing solutions to its clientele. It provides securities based lending services to small time investors and business houses. Supplying liquidity at attractive rates through secure channels is the firm’s specialization and it boasts of more than 650 successful transactions that have helped many of clients around the globe. The firm has seen a growth of 30% in its closed loans transactions in the past 3 years.
Bloomberg mentions that Equities First Holdings has currently bases in 9 countries with their headquarters in Indianapolis. Their latest acquisition includes the acquisition of Meridian Equity Partners Ltd in the UK.
Visit their website at Equitiesfirst.com for more information.