Non-Recourse Stock Loans Leverage Stock Portfolios to Raise Capital

Non-Recourse Stock Loan AgreementNon-recourse stock loans are not a new concept in the global marketplace. For a number of years, stock loans and equity loans were only available to high net worth clients with accounts at large international institutions.

These loans provide borrowers with access to funds secured by their stock portfolios without requiring personal guarantees or recourse to other assets. 

Oceanview Consultant Partners is one of few alternative legitimate sources to introduce this stock loan product to a wider range of customers in an effort to democratize alternative financial solutions.


In the world of finance, non-recourse stock loans have gained traction as a viable option for investors seeking liquidity without relinquishing their stock ownership. This financial instrument offers a unique opportunity for investors to leverage their stock portfolios as collateral without bearing personal liability beyond the pledged assets. This article delves into the intricacies of this securities based lending program.

Understanding Non-Recourse Stock Loans
Using shares as collateral for loans are financial arrangements where borrowers pledge their stock holdings as collateral to secure a loan from a lender. Unlike traditional loans, where personal assets and creditworthiness often serve as collateral, non-recourse loans rely solely on the value of the pledged stocks. In the event of default, the lender’s recourse is limited to the liquidation of the pledged collateral and the borrower is not personally liable for any shortfall.

Mechanics of Non-Recourse Stock Loans

The process of obtaining a non-recourse stock loan typically involves several key steps:

Evaluation of Collateral: Lenders assess the value and liquidity (trading volume) of the borrower’s stock portfolio to determine the loan-to-value (LTV) ratio. For example if your stock is valued at USD 5.00 and the LTV is 50% the lender would potentially loan USD 2.50 per share.

Higher-quality stocks for example securities with exceptional earnings per share, solid business models, dividends paid to shareholders and stable trading volume (more liquidity) command higher LTV ratios. This evaluation provides borrowers with greater borrowing power.

Loan Terms and Conditions: Once the collateral valuation is complete, lenders offer loan terms, including amount of funding and scheduled tranches, interest rates, loan duration, and LTV ratio by issuing a Term Sheet. Borrowers have the opportunity negotiate these terms with the lender based on their financial needs and risk tolerance.

Stock Pledge and Disbursement: Upon agreement of terms by both parties the lender will issue a stock loan agreement to the borrower defining terms and conditions of the loan. Borrower is required to open an account in their name at lenders custodial brokerage and pledge their stock holdings as collateral. The lender then disburses the loan proceeds within 48 hours via an internal DVP (Delivery Versus Payment). The pledged stocks remain under the borrower’s ownership, but gives the lender full power and control over the custodian account and the collateral during the loan term.

Repayment and Redemption: Borrowers typicality make quarterly or semi-annual simple interest payments according to the loan agreement. At the loan’s maturity or upon repayment, borrowers redeem the collateral by repaying the principal amount, plus accrued interest. Alternatively, by mutual agreement borrowers may choose to extend the loan term or surrender the collateral to settle the debt.

Typical Terms of a Non-Recourse Securities Loan