Frequently Asked Questions (FAQ)

Last Updated August 15, 2008

Please use our contact form for questions.
Please read our disclaimer pursuant to all information on this site.

[ What is the eligibility criteria for HedgeLoan stocks? ]

Please visit our criteria page. A rule of thumb is used that states basically that if price has held steady or increased over the prior four weeks, and volume has been strong, then there's likely to be a HedgeLoan available for your portfolio. Inquire directly for a specific response.

Stocks that have several zero trading days over the past 4-8 weeks or huge swings in price or volume over a relatively short period of time may find fewer offers than stocks with lesser volatility.

We accept portfolios as small as $10,000, with upward limit defined only by regulation (i.e., DRIP rule for insider transactions) and stock performance.

We accept restricted stocks provided that they have been available for at least 6 months - "seasoned" six months.

[ What kind of credit score do I need to qualify for a HedgeLoan?

None. We do not use credit scoring in our program, and we do not report defaults to credit bureaus. The type and quantity of your stock is the only criteria we use to determine loan eligibility. (Please note that in compliance with Patriot Act and Homeland Security requirements, all applicants must submit a copy of their driver's license and/or passport as part of their application).

[ What types of HedgeLoans do you offer? ]

We currently offer four different HedgeLoan families, each with their own characteristics. Lenders whose loans are offered through HedgeLender have their stock loan programs folded under one of these HedgeLoan program categories. Please note that we also have two new programs, including a restricted stock program, not listed here but scheduled for formal rollout and for which we are accepting applications. We will add these lending programs to your mix of competing offers upon formal addition to our group.

1) EZ HedgeLoan: Good range of stock eligibility. LTV 40%-80%. Pay off your HedgeLoan early with nominal penalty. Avail of up to 80% (occasionally higher) loan-to-value in a nonrecourse package. Interest-only loan with payments due quarterly and quarterly review for higher loan amounts if stock price has moved upwards. Dividends paid directly to borrower when earned and shares voted per client's instructions. Callable and noncallable versions available. Read Fact Sheet here for more details.

2) Flex HedgeLoan: Ideal for strong stocks seeking lower interest rates particularly. LTV 35-75%. High growth-per-year upside cap, (e.g., 3 year loan, all appreciation of stock up to 300% of initial value to account of borrower, excess only after cap has been met to lender). Interest-only paid quarterly. All dividends credited, regardless of amount, against interest. Terms to five years maximum. Recourse limited to stocks only in case of default, not reported to credit bureaus: As with most HedgeLoans, forfeiting collateral shares (converting loan to a full sale to lender) constitutes 100% fulfillment of loan regardless of price. Callable at very generous (and rare) 50%-60% price drop only. Read Fact Sheet here. Contact us for questions

3) Flag HedgeLoan: Available for standard range of free-trading stocks with price of no less than $3/share and price X average volume of at least 80,000. Up to 90% LTV nonrecourse loan. 100% hedged primarily with investment-grade, U.S., private options. Licensed RIA account manager. Non-callable, interest may accrue to maturity or be paid quarterly. U.S., Japan, UK, and Israel foreign exchanges welcome. Read Fact Sheet here. Contact us for questions.

4) Cap HedgeLoan: Identical to our Flag HedgeLoan, with capped upside at 10-30% per year. Available to a somewhat larger range of stocks including some pink sheets. No margin calls, limited recourse, options hedged. Read Fact Sheet here. Contact us for questions.

Each family or category contains many variants which can result in hundreds of potential loan structures within each family and multiple lender participation.

[ Do you accept restricted stocks that can be sold under Rule 144? ]

Yes, we do accept restricted stock loan shares into our programs although the eligibility criteria is more stringent. The stocks should have been issued for at least six months ("seasoned" for six months) and the minimum face value needs to e $1M.

[ Do my stocks have to be in electronic format? ]

None of the programs used by our lenders allows for a stock hedge, regardless of what method is used to hedge, unless and until it is in electronic format. Stock certificates will therefore need to be converted to electronic format by your brokerage. In most cases, with your permission, we can help facilitate communication and administration to ensure that all details are attended to, although it may add time to your loan process. Conversion to electronic format is normally a simple process that is best handled by the client, though we will assist to the extent we are able and authorized to do so by the client.

[How long until borrower receives his loan cash?]

Very quickly, but ultimately it depends on how quickly the shares can be transferred from the borrower's accounts to our accounts for hedging, and on the loan program and type/quality of stock. Typically, a client receives his loan within 3 business days of closing if everything is moving along smoothly

Flag, Cap, and EZ HedgeLoans will fund on a schedule roughly approximating 2-3 times the average four week volume of trading on each stock. A stock averaging 100,000 per day will be processed at the rate of between 200,000 and 300,000 per week, sometimes more. Flex loans vary by quality of stock but typically are fully funded within 1-2 weeks. Inquire for specific funding estimates: Most deals with strong volume will fund within a week receipt of shares.

[ What happens to my stock's dividends while you hold the shares? ]

With the EZ HedgeLoan stock loan program, your dividends are paid directly to you. With our other HedgeLoan programs, your dividends are credited against your interest owed. Our two new programs (Merit and Release) scheduled for full rollout in June, 2008, will also allow direct dividend payment to the client as an option.

For large transactions (over $25MM in value), Flag/Cap HedgeLoan may be constructed to pay dividends directly to the borrower, provided that interest is paid quarterly.

[ How will my shares be voted? ]

With EZ HedgeLoans and selected Flag/Cap HedgeLoans, your shares will be voted according to your instructions. Shares are otherwise voted "with management", the default election on most proxy statements.

[ What is the role of interest in a HedgeLoan structure? ]

Interest payments serve different roles in different products. They do not normally constitute profit in the context of an EZ, Flag or Capped HedgeLoan, but may be part of our funding partner's profit in the case of Flex HedgeLoans.

For EZ, Flag, and Cap HedgeLoans, interest payments are part of the overall structural mix that allows a collateral asset of variable worth to be converted to what amounts to a fixed asset so that funds can be lent against that asset without significant risk to the lender. In most cases, interest can therefore be thought of as a means to ensure that all shares we hold are securely hedged for the borrower, while making good economic sense to the lender as well.

Remember a "hedge" does not necessarily mean an options-style or hedge fund style "hedge". A hedge is a counterbalancing action to offset a risk. All hedges are conducted within the permissions granted within the loan contract only for all of our participating lenders.


[ Are there any hidden costs or fees? ]

No. HedgeLender is famous in the industry for being plain spoken, approachable, and ready to serve our clients. If problems arise, they will get full personal attention. We do receive referral fees and commissions (the latter authorized by you as borrower only) and our total referral plus commission fees typically amount to no more than 5% of the gross loan value.

Quotes are always free, and we do not receive a penny unless the loan itself closes, and then our fees are paid from the gross loan proceeds only.

We are a full disclosure company. HedgeLender absolutely does not accept up-front consulting or "commitment" fees nor do we authorize any of our agents to accept them.

[ I am a foreign resident. What about the Patriot Act and HedgeLoan? ]

HedgeLender is happy to offer a flexible, secure loan product to our foreign clients holding stock in the many exchanges where we operate if eligible. However, foreign clients must be willing to product a legible photocopy of the front and back covers of their passport and a signed statement that the proceeds shall be put to acceptable purposes under the Act.

[ Is HedgeLoan available to corporate affiliates? ]

Yes. Affiliates or "insiders" (directors, CEO's, owners of 10% or more of outstanding shares) will typically have what are called DRIP (or "dribble rule") regulation limits on the total number of shares they can place into HedgeLoan financing in a given 90-day period, just as with any sale (although HedgeLoans are not structured in our loan contracts as sales, but as loans, and these precautions exist primarily because each loan can potentially result in a default, at which time the loan does indeed formally and contractually become a reportable sale generating a 1099 tax document from the lender). This number is set at the greater of either the prior average four week trading volume total, or one percent of the total outstanding shares. This rule is also in effect because your HedgeLoan exit allows you to instruct us to sell your shares to pay off your loan principle and any interest, if you desire, at maturity. These must also be reported in compliance with IRS reporting and any applicable SEC regulation.

[ I've gotten bulk mail by "stock lenders" and I've seen some of them who have purchased keywords on Google. Who are they? ]

Mostly inexperienced brokers trying to impress you with a website.

Recently some imitators have attempted to pass themselves off as legitimate stock loan companies although they have no experience and no lending facilities. Because they cannot place naturally for high rank on Google or Yahoo, they spend money on "pay per click" to attempt to appear more legitimate than they really are (Google only ranks legitimate sites with high "trust factor" at the top - like HedgeLender for keyword "stock loans" - using very strict quality criteria which doesn't apply to paid ads).

Most are Johnny-Come-Lately individual brokers posing as "companies".

On emailings, these operations may tell you they have great "agent" programs although they have none of the sort. Some of them may even ask you to pay money up front (nonrefundable) so that once you find out you don't want anything to do with them, they already have your cash. These mostly unscrupulous "stock loan companies" show you flashy graphics in the hope that you'll overlook the fact that they've only turned their attention to the stock loan business very recently.

We strongly urge our clients to say away from anyone who tries to imitate legitimate companies like HedgeLender using "stock loan" websites with clever phrases designed to make it appear they have a product or lend directly. Trust only registered products and companies with a clear, established history of no less than 7 years. Do not trust "web companies" with very little or no experience in the stock loan industry attempting to convince you they are something else.

Watch out for mortgage, insurance, or CPA companies attempting to pass themselves off as "stock loan" firms or companies making specious claims of being "in the stock loan business" for extended periods that are untraceable when in fact they have no history at all. Avoid those who come up with friends as "references" who have never concluded a loan or who are unwilling to prove what they say.

HedgeLender only delivers stock loan quotes from account managers and lenders that have a solid, established track record and that have passed our HedgeLoan® certification program, which examines the program before allowing it to be part of our system. Any loan program we deem below our standards, or that ceases to perform or correct performance problems, is given an opportunity to improve and if they do not do so in a reasonable time frame, they are dropped and we will not allow quotes for such programs to be delivered to our clients.

We are licensed to deliver stock loans in the most regulated state in the union, California and have a perfect record in that state as well as with the Better Business Bureau, where we have had no complaints over many years and hundreds of loans. Should any issues or problems occur, we handle them directly and immediately.

In summary, we urge prospective clients to be cautious with any organization offering a stock loan that doesn't have at least five proven years of specific stock-loan-industry experience to back it up, with references. Until you've asked the most important questions of all: "How long have you been in business?", and "Can you prove it?', we believe prospective borrowers should proceed with caution. Read our report "Borrower Beware" here.

Better yet, place your business with a company like HedgeLender with an outstanding track record that has earned the trust of thousands of clients over the years - and sleep better at night.

[ How can I be sure my stocks will be returned upon repayment? ]

Our track record and our reputation. Security and compliance are the basic building blocks of our company. HedgeLender's HedgeLoan label is in essence a form of what we call "certification" that says that to the best of our information and belief, your hedged portfolio funding structure meets the highest standards for security, compliance, liquidity, and personal service in the industry. In practical terms, we feel safe in saying that your loan contract will be executed as agreed when part of a HedgeLender stock loan program, and that there is no danger in your stocks not being returned, in full and in compliance with your loan contract, on time, upon repayment.

[ Can I prepay my HedgeLoan? ]

You can prepay your EZ HedgeLoan at any time after a set number of contractually stipulated months, with each loan customized to client preferences and stock quality. If you have a particular prepay scenario in mind, bring that to the attention of your HedgeLender representative when applying for your loan quote.

Flag, Flex, and Capped HedgeLoan are normally selected for specific, set counterparty terms. Flag and Capped HedgeLoans can in some cases be arranged to allow repayment during annual repayment windows once a year. EZ HedgeLoans can be paid off typically after three to six months.

[ Can I renew the loan? ]

Every HedgeLoan can be renewed. Each one has its own particulars, but as a rule, there is a nominal renewal fee and new loan documents are issued. Contact us for specifics that can apply to your portfolio and loan program.

[ Do I get regular account statements? ]

Depending on the program you choose, a monthly or quarterly invoice/account statement will be issued, typically covering total share value, interest accrued, and net profit or loss (if any) if the loan were to be repaid on that date. Other useful information is included from time to time depending on the loan program.

[ What are my exit options at loan maturity? ]

For every program, you may renew your HedgeLoan; pay if off out-of- pocket with your own cash; ask us to sell the shares, pay off the loan, and remit any profit back to you as share owner/borrower up to any caps your loan may have; or walk away entirely from the loan and owe us nothing but the shares, regardless of value, with no negative effect on credit record, what is called the nonrecourse provision. (Please note that there may be tax consequences for one or more of these scenarios. HedgeLender offers no tax advice whatsoever. Please consult your licensed tax professional for information specific to your tax situation).

Since your loan provides for monthly or quarterly interest payments depending on the loan program you choose, you may be liable for any unpaid interest up to that date if you choose to repay your loan early via the EZ HedgeLoan program. If your Flag or Cap HedgeLoan has a one or two-year exit "window" (during which you will have approximately seven days to pay off the loan to repatriate your shares), you may be liable for interest beyond that date. Please inquire as to your specific loan offer.

[ Who do I contact if I have questions during the loan term? ]

You will receive a phone number, toll-free, or you may use our email Contact form.

[ Is the transfer of my shares to lender safe? ]

Yes. Transfers occur via secure, nationally and internationally accepted transfer using the DTC system - the safest and most common system in the U.S. securities industry. Stocks reside in these transfer accounts to await the hedging process, or are moved directly into the lender's U.S. safekeeping account for the duration of the loan term, depending on the loan program chosen. Confirmations of every step of the transfer process, by phone and e-mail, are provided upon request to every client.

DTC transfer is in sum a common stock transfer method used by banks and brokerages throughout the U.S. and many foreign countries, with an excellent record for security and transparency. For more information on the DTC system, please click here.

[ Does the lender have the right to sell my stocks? ]

The lender's rights are spelled out in the loan documents that will be delivered to you upon receipt of your loan application. Each program includes language allowing the lender a variety of rights necessary to hedge lender's risk of loss in the event you default on your loan repayment. These right allow sufficient risk reduction to permit a loan facility to be offered to the client. Borrowers should always read over their loan contacts thoroughly and should never undertake a stock loan without understanding the terms and conditions of that contract.

[ Is there any way to lower my interest rates? ]

Yes. Many in fact! Your goals, your loan term, the track record of your stocks, and the type of loan you choose will all have a bearing on interest rate and many of these you can control.

But for all loan programs, the most common way to effect a lower rate is via a cap on appreciation of the portfolio while we hold it as security. The more restrictive the cap (less upside to you), the lower the interest rate. Check our offer and if you can't live with it, tell us. We'll try to modify one or another aspect of the loan or offer a different program so that you can achieve a rate you can accept, if that is possible.

[ Are there any other risks I should be aware of? ]

There is of course no such thing as a 100% riskless securities transaction, and stock loan transactions are no different. Stocks sitting at a top brokerage also are at risk to some extent, for example. Securities transactions by their very definition are not risk free.

You will receive, typically, several stock-secured loan offers from HedgeLender. You will be free to choose any of them. You will receive loan documents and have plenty of opportunity to review every page -- which we strongly urge -- prior to signing. We do not offer loans through HedgeLender for which we feel there is any measurable risk, but that does not mean there is no risk. How much risk there may be will always be a matter for you as client, perhaps in consultation with your attorney or CPA, to determine.

We can say that we at HedgeLender have carefully built our HedgeLoan program from the ground up, feature by feature, program by program, until today we take pride in our ability to offer what in our judgment are four legally compliant, well-structured stock liquidity tools employing top-rated U.S. institutions, skilled account managers, and no non-transparent structures - structures that have stood the test of time and built an outstanding track record four our company in the process. Where we've encountered lenders who do not perform to our standards, we have given them the opportunity to correct deficiencies, and if they fail thereafter, we remove them.

From the start, compliance and security have always been our first priority. A securities loan program that focuses on legal and regulatory compliance first, we have always believed, would provide the foundation for a range of features and benefits that would serve our clients properly over the long term. Although your obligations, rights, and responsibilities will be represented solely by your contract with your chosen lender/account manager, the programs we offer we believe to be solid and secure, with strong and consistent track records over time and many satisfied borrowers as well (references available on request).

We try to think like our borrowers, anticipate the issues that will be of greatest importance to them, and then deliver the services our clients demand. We will always dedicate ourselves in every way to resolving any issues that arise as they occur, and as a company, HedgeLender can be depended on to put our clients interests first.

Behind all of this too is HedgeLender LLC's track record of hundreds of satisfied clients, many glowing references, and widely recognized leadership in this niche financial field. We own the registered U.S. Patent and Trademark Office mark "HedgeLoan". We have been Accredited Members of the Better Business Bureau for many years with a perfect record and no complaints. We readily provide references from satisfied clients and others who can vouch for the quality of our loans and the dedication of our staff, and receive praise both verbal and in writing weekly for our attentive service. HedgeLender clients demand a personal, customer-oriented approach and clear, honest answers to every question, and we strive to meet these expectations every day.

We stand behind the statement that any loan earning the HedgeLoan label will be the most secure and well-designed in our industry, bar none. We do our best to select lenders who meet these goals. We understand that our mission is to serve our clients, the individuals who are entrusting us with what, after their families and loved ones, is likely to be their most prized possession - their financial assets.

We take that responsibility with the utmost seriousness at HedgeLender, and we challenge our clients to find better stock collateralized loan products or better customer care than that which we offer here all under our one roof.

If you still have questions, we welcome them. Please use our handy Contact form and we will respond same day.