Charles Marsala Explains The Basics of a SECURITIES-BACKED LINE OF CREDIT

Charles Marsala November 23, 2014 0
Charles Marsala Explains The Basics of a SECURITIES-BACKED LINE OF CREDIT

A Securities-Backed Line of Credit (SBLOC) provides the ability to borrow against an investment portfolio without disrupting any of the investments within it. You can use an SBLOC for almost anything: a real estate purchase, a tax bill, tuition payment – anything, in fact, except the purchase of additional securities. An SBLOC will give you the liquidity as Your Portfolio Remains Intact.
SBLOCs are sometimes referred to as “Asset Based Lending”.
SBLOCs are available to individuals, trusts and entities. Generally, there is no income verification for individuals. SBLOC loans can have minimum and maximum lines of credit based upon the value and type of underlying collateral.
ELIGIBILITY REQUIREMENTS:
To qualify for an SBLOC, the securities within your portfolio must typically meet the following eligibility requirements: the Equity Securities and Mutual Funds must be traded on a major exchange market: NYSE, AMEX or NASDAQ; have an available daily market price; have a share price above $5.00; have satisfactory, restriction-free market liquidity; and have no restrictions on transfer.
Credit Limits vary depending on the Asset Class: Typical rations for Equities are 50%; Investment Grade Fixed Income are 80%; Treasuries are 90%; and Cash and Equivalent is 100%.
Variable Interests Rates apply depending on the amount. Most SBLOCs have a floor of 3.5% and depending on the balance rates will range from Prime plus 1% to Prime -0.25%.
SLBOCs advantages are that the new liquidity comes without disrupting a carefully crafted investment strategy or without creating unwanted tax consequences.
This article is for informational purposes only and not a substitute for tax or legal advice. Consult the appropriate professional to learn how this information applies to your unique situation.
About the Author: Charles Marsala is a Financial Advisor with Benchmark Investment Group with Securities offered through LPL Financial, a member FINRA/SIPC. He can be contacted at Charles.Marsala@lpl.com

Comments are closed.