Security Backed Loan

Security Backed Loan

A Security-Backed Loan (“SBL”) is a loan collateralized by shares (“Collateral Shares”) of a publicly traded company stock, which can be a useful tool for short or long term borrowing needs of an individual or publicly listed Companies.

Shares can be traded on many major markets such as: Hong Kong, Singapore, Malaysia, Thailand, Philippines, South Africa, Turkey, France, Italy, etc.

SBLs are a simple and effective financial instrument that allows the Borrower to maintain a position in the market (no need to sell stock), while creating liquidity to meet an immediate monetary goal

Because of the non-recourse nature of our loans, clients are able to use this product not only as a low risk source of liquidity, but it can also be used as a hedging tool to protect gains in the value of the equities being offered as collateral.

Key Highlights

Allied’s loan structures offer a wide range of benefits, including some notable difference from those offered by banks, securities brokers and other counter-parties:

Non-recourse (i.e., no additional personal assets needs to be pledged as security/borrower’s risk is limited to the collateral shares)

Loan amounts can range from under $1M USD to over $100M+ USD per tranche
No margin calls
No Short Selling
Even micro-cap/small-cap shares acceptable as collateral
LTVs typically ranging from 40% to 65%
Loan terms can range from 24 to 60 months
Fixed annual interest rates typically below market rates (3.5% to 7% per annum)
Ability to retain upside market appreciation

Anticipated Process Timeline

Week 1
Borrower submits inquiry for loan by providing a stock symbol, number of shares to pledge and target loan amount. Lender determines the viability of the loan, and calculates a loan-to-value ratio (LTV) , duration and the interest rate, based on an assessment of both short and long term risks.

Lender issues a term sheet to borrower. Terms are negotiated & finalized. Borrower signs term sheet, completes questionnaire, and sends copy of passport and brokerage statement to lender.

Week 2
Lender receives Term Sheet and sends contract to borrow for review.

Final contract is negotiated & signed.

Week 3 & 4
Borrower opens brokerage account at lenders designated brokerage firm.

Both parties coordinate a delivery date with their respective brokerage firms for delivery of collateral.

Once lender has been notified collateral has been delivered, the loan is funded according to the loan agreement.