Equity First Holdings has seen more purchase in stock-based loans and margin loans at a time that banks and other financial institutions have tightened their lending criteria. Equity lending is gaining more popularity by catering to clients that do not qualify for conventional credit-based loans.
In recent times, banks have stiffened their lending criteria by imposing stringent rules for borrowing. Such rules include tightened credit qualifications and increased interest rates. Al Christy believes that loans collateralized by stock are an innovative substitute for loans borrowed by individuals that seek capital. Stock-based loans are advantageous because they offer higher loan-to-value ratio than margin loans. Moreover, they offer a fixed interest rate that provides certainty throughout the transaction period.
Christy said that market fluctuations are inevitable over three years. She continued by stating that stock-based loans provide a hedge because they lower a person’s investment risk in a downside market. Christy further said that stock-based loans are better than cash loans because they have a non-recourse feature that enables the borrower to walk away from the loan at any given time. Therefore, the borrower can keep the initial proceeds without any obligations to the lender.
Christy stated that borrowers of stock-based loans expect fixed interest rates between three to four percent. The loan-to-value ratio of stock-based loans ranges between 50 and 70 percent. Moreover, the lender of a margin loan can liquidate a borrower’s collateral without warning at any given time. On the contrary, margin loans have a lower loan-to-value ratio of 10 to 50 percent.
Equity First Holdings is a company that provided security-based lending services to investors and businesses. The company was founded in 2002. Its headquarters are Indianapolis, Indiana. The Founder and CEO of the company said that the firm had been built on a code of transparency and integrity. She stated that the firm relies on the leading regulatory, legal, and trading institutions for counsel.
The company has successfully managed to complete more that 650 transactions worth more than $1.4 billion since it was founded. The firm has subsidiaries in Hong Kong, Britain, Australia, and Singapore.
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