Categories: Business

What Are Single Stock Loans?

Single stock loans use the value built up in a single stock as collateral for loan borrowing. As a relative niche lending stream, borrowers often benefit from using the services of a specialist broker to help organize competitive single stock loan lending. With many mainstream lenders not having the expertise to deal with the complexity of such borrowing, the expertise offered by specialist finance brokers will ensure that you approach lenders best able to meet your requirements. Here, we explain more about single stock loans, so you can see whether they could be right for you.

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Single Stocks

Single stock investments can come about from many situations, and for single stock loans, how the portfolio came about is often of little consequence to potential lenders. However, they will wish to know the history of your investment in the stock to build a picture of the loan security offered.

The most common accumulation of a significant single stock portfolio offered as loan collateral occurs when wealthy individuals run a public or private business and hold much of their wealth in business shares. When entrepreneurs sell a successful company, they may keep a significant portion of the company’s shares and wish to use this investment as security for future borrowing.

Larger corporations may also offer stock options and share schemes to long-serving employees who, throughout their career, may build a significant investment that they seek to use to secure borrowing to fund other activities such as a high-value mortgage or bridging finance.

Single Stock As Loan Collateral

Lenders demand liquidity and high stock volumes in the single stock loan market and such borrowing is more suited to borrowers seeking significant capital sums. These loans can be more complex to arrange than standard securities-backed lending offered by portfolios with greater diversity. A single stock carries a more concentrated risk for lenders. Therefore, your financial situation and stock information must be presented effectively to lenders most likely to offer borrowing for your situation and financing requirements.

Favorable lending decisions rely on the bigger picture. They can equally be down to how the facts are presented to the lender and ensuring suitable lenders are approached to get the best fit for the loan collateral you offer and the outcomes you want. This is especially important when you seek to use illiquid or low trading stocks as collateral, as lenders will be seeking to ensure that the collateral will be tradeable and of sufficient value should the loan default.

To make their decision lenders will look at your bigger personal and financial situation and often consider emotional factors as well as financial ones to make their decision. This is where a broker can be your biggest asset, as they have experience of presenting information favorably and understand the complexities involved to ensure that the best deals are achieved from lenders.

How To Give Yourself The Best Chance Of Success

As we mentioned, lenders assess each situation individually when deciding loan terms. They consider not only your stock offered, its liquidity and the minutiae of your financial situation, they also look at the bigger picture and your financing aims, so presenting this information in the right way is essential. This sector of the loans market is often only open to individuals introduced via a broker as a partner to the application, with many lenders out of reach for direct applications.

By partnering with a specialist broker, you can expect things to move quickly, with your broker updating you regularly on lender introductions and negotiations. If successful, loan offers can be received in as little as 24 hours.