Single Stock Loans

Single Stock Loans

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What are Single Stock Loans?

Single Stock Loans are very much like a standard Lombard loan where securities are used as collateral by a lender.

The lender takes custody of the shares for the loan term and offers the borrower a credit line in return.

Key Points About Single Stock Loans:

1. Collateral: The loan is secured by a specific stock that the borrower owns. The lender takes a lien on this stock as security for the loan.

2. Ownership Retention: The borrower retains ownership of the stock and can benefit from any future price increases. However, in most cases, the stock must remain with the lender as collateral during the loan term.

3. Loan Amount: The loan amount is typically a percentage of the stock's market value, often ranging from 50% to 70%. The value of the stock and its volatility will influence how much the borrower can obtain.

4. Uses: Single stock loans provide liquidity for various purposes, such as personal expenses, investments, or debt repayment, without selling the shares outright.

5. Risk: If the stock price declines significantly during the loan term, the borrower might need to provide additional collateral or risk default. In case of default, the lender may liquidate the stock to recover the loan.

6. Non-Recourse Option: Some single stock loans are non-recourse, meaning the borrower is not personally liable beyond the stock used as collateral. If the stock’s value declines dramatically, the lender’s only recourse is to sell the stock.

7. Individuals & Directors: High-net-worth individuals or company directors with a large holding of a particular stock often use single stock loans, especially if their wealth is concentrated in a single company.

Find out how our panel of Specialist Finance Brokers can assist in finding the right deal for you.