What Makes These Lending Facilities Different?

There are many financing programs that require you to change the title of your securities into that of the lender/financier before you can be funded. And there is nothing wrong with such programs if you have no objection to doing so and you are comfortable with their asset-to-liability position and track record. We can refer you to a transfer-of-title program that meets those standards if you wish. However, in the wake of the Wall Street scandals and economic aftershocks of 2008-2009, the changing of title of one's securities is not nearly as acceptable as it once was for many securities owners seeking an alternative to the sale of their securities to raise capital.

HedgeLender LLC today focuses its securities-backed financing on institutional (regulated, SIPC-member, fully licensed, major brokerages and banks) that can offer securities-backed loan quotes and lending facilities with a credit line derived from the additional resources of a large Swiss-U.S. equity fund currently operating out of New York. This allows higher loan-to-value, and better interest rates and other features not normally found in a securities finance arrangement.

These are programs that do not require any change of title or ownership of the securities prior to funding. The shares remain locked in borrower's own account during the loan term. They are not sold or traded to fund the loan.

Our original hedged portfolio loan product was our well-known trademark HedgeLoan®, a loan in which the risk of being unable to repay the loan and the need to default was mitigated for both lender and client to ensure a measure of protection for the collateral.

Today, HedgeLender continues to make these hedged portfolio loans and securities finance services available through our institutional loan program. In consultation with his/her licensed account advisor, the client authorizes structuring of options as part of the loan structure, which fixes lender risk of portfolio loss sufficient to permit a limited recourse-default-style loan should the client be forced to default. (Definition of limited liability loan: one in which the client's liability should they default on repayment can be limited, ideally, to the collateral that secures the portfolio alone and cost of option hedge, regardless of how far in value the portfolio may have dropped.)

Both hedged and non hedged portfolio loans are normally structured with no margin calls, interest-only payments, and higher loan-to-value than is common with conventional stock margin loans. And because the hedged portfolio stock loan is only offered through top U.S. SIPC-member banking and brokerage firms, they represent an additional level of security for those holding optionable (i.e., stocks with public options as published by Options Clearing Corporation) stocks or other securities.

To recap: A wide range of securities finance structures are available. While we can refer you to a transfer-of-title program if you wish, HedgeLender loan programs are entirely through SIPC-member banking/brokerage institutions and loan contract and asset management are entirely though the facilities of these institutions. The purchase and structuring into the loan of a public option can reduce lender risk of loss, allowing lender to pass along the benefit of that reduced risk to the borrower and reduced repayment risk to borrower by limiting borrower liability in the event of default on repayment. In this way, the borrower can enjoy the freedom of knowing that should financial problems make it impossible to make payments on the loan, borrower's default and will result in most cases only in the forfeiture of the collateral securities and no other assets are at risk (and no credit bureau reporting), even if those securities are worth very little by that time.

These loan facilities are not necessarily meant to replace any other form of financing, though that is certainly an option. Rather, we look upon them as a potentially useful complement to your existing financial planning tools and choices. A stock loan or securities finance program of this type can be used to purchase a home, a yacht,pay off tax liabilities, or to restructure debt or buy a company. They may be combined with other forms of financing too.