Common Asked Questions About Stock Loans and Block Trades
Below you will find frequently asked questions by some of our previous clients. If you do not find the answer you are searching for on this page please Contact Us by clicking here where you will several ways to get to get intouch with someone who can answer your questions.
WHAT IS THE MAIN DIFFERENCE BETWEEN A STOCK LOAN AND A MARGIN LOAN
A higher LTV (Loan to Value) is given for a stock loan, or loan to value rather than a margin loan. It also usually results in a higher loan value, lower rate of interest and the repayment terms are more flexible. It is an easier and more convenient method to raise capital for a shareholder
WHAT IS THE LOAN PROCESS?
A simple request must be submitted to OVCP either by the client or client’s broker for a quote request. OVCP will evaluate the stock and submit back a Term sheet that includes, but is not limited to the loan amount, LTV, interest rate, fees and loan term. If the terms are agreed upon by both parties a contract is then prepared and submitted to the client for review and acceptance. Execution and the delivery of the documents will be done with OVC and the client. Authorization of share transfer and funds will be executed via DVP (Delivery Verses Payment) or through a wire transfer.
FOR A STOCK LOAN, WHY IS THERE NO CREDIT CHECK?
A stock loan is non-recourse and the only collateral pledged are your securities. There is no personal guarantee or any credit check required for it.
WHAT IS A STOCK LOAN?
A stock loan is a way to raise capital by pledging free trading shares to a lender that you own of a publicly traded company. The shares are analyzed by the lender for the suitability of a loan. Typically the loan ranges from 30% – 60% of the market value of the stock.
A Term Sheet is Issued to The Borrower which Includes
- LTV – Loan to Value of the Market Price of the Stock
- Rate of interest- Simple rate of interest paid quarterly in arrears.
- The term of loan – the length in months of the loan period
- Fees – the lender charges fees which are a percentage of the total amount funded.
A Non-Recourse Loan Agreement is prepared after the Term Sheet is accepted. The transfer of the pledge security takes place, and the loan is funded by DVP or wire transfer. Depending on the individual shareholder and circumstances the loan can be funded in as little as 3 or 5 days.
HOW QUICK CAN I GET THE FUNDS?
Funding usually happens within business 3 days. Funding takes place after the execution by both parties of the Non-Recourse Loan Agreement, Control Agreement and the transfer of the pledged collateral to your custodian account at the designated Brokerage.
WHAT IS LTV?
LTV is the abbreviation for Loan to Value. Loan to Value is a term used to calculate the percentage to fund on the full market value of the pledged stock.
WHAT ARE TYPICAL LTV’S FOR A STOCK LOAN?
The common LTV range is between 30% and 60%. Each pledged stock is evaluated for the highest LTV possible. In some cases an LTV of 65% is possible.
WHAT ARE NORMAL INTEREST RATES FOR A STOCK LOAN?
The Lender decides the rates based on the collateral strength and the environment of the market. But normally the rates are between 3% and 6%.
WHAT IF I DEFAULT ON MY LOAN?
You will not be penalized if you default on paying the interest on a stock loan. With a private non-recourse stock loan, the pledged stock is the only way for the lender to recoup its funds. You can walk away from the obligation or re-negotiate terms with the lender. You simply have no personal liability.
WHAT STOCK EXCHANGES DO WE TRANSACT LOANS?
We transact loans on stocks trading on all the major exchanges primarily in Asia, Hong Kong, Indonesia, Singapore and Australia. Please visit our Markets We Service page for all the exchanges we transact on.
CAN I KEEP MY STOCK DIVIDENDS?
Stock dividends are usually paid toward the interest on the loan. Any excess is returned to the borrower.
WHAT KIND OF SECURITIES DO WE LOAN AGAINST?
OVCP only transacts loans on publicly traded companies on stock exchanges in Asia, Hong Kong, Indonesia, Singapore and Australia. Please visit our Markets We Service page for all the exchanges we transact on.