Commercial Finance America, LLC creates and implements intelligent, compliant, and innovative methods for stock owners to obtain cash from their equities without the necessity of a sale.
With this form of financing, shareholders obtain liquidity from their asset, retain contractual ownership and voting rights, enjoy the tax benefits that come from not having to sell their securities, and profit from the appreciation of their asset should the stock price rise in value as the loan matures; excluding principal and interest obligations.
There is no personal recourse beyond the collateral in the event of a default of the loan. With this form of non-recourse financing, a shareholder can enjoy the freedom of walking away from their loan with no further obligation should the share price decrease in value. This flexible exit strategy provides the shareholder with the option to either prepay the loan and reclaim their securities or walk away from their quarterly interest obligation entirely and forfeit only the collateralized securities.
For affiliates holding large positions, this form of recourse financing provides the shareholder with access to capital in a private transaction without having to sell their securities to market. Rather than being subject to limitations of quarterly registrations and limited liquidity, as well as a loss of upside upon every sale, the shareholder can now enjoy the benefits of their true net worth, without foregoing upside loss.
Loan terms are 1 to 3 years with 12 month to 18 month prepayment lock outs, with the option to renew the loan for one additional year, at term of loan.
Agreeable Payment Structure:
Interest rates between 2% and 5% fixed; based on certain variables and conditions of the asset pledged and the exchange it trades on. Simple interest payments are due quarterly, with the principal due at term.
LTV’s range from 55% to 75%, depending on both position size and exchange where traded.
No Margin Maintenance Requirements:
The structure of this loan does not include the use of margin maintenance requirements.
Investors Maintain Upside Potential
In the event that there is no default, and a condition of their term, the borrower retains the benefit of appreciation upon repayment of all interest and principal due.
Domestic and International Exchanges
Loans are available for securities on virtually all exchanges, both US and International; Bulletin Board and Pink Sheet securities are acceptable as long as they qualify. Availability and terms of loans may vary based on the individual security and the details of their particular market.
Options & Warrants
Commercial Finance America, LLC can help shareholders convert their options and warrants into stock without the need to pay out-of-pocket capital, nor the need to sell to facilitate the cashless feature of the underlying security.
The Action — When employee options vest, the need to pay for the option up front is non-existent. A shareholder’s only prospect of converting would stem from a sale at current market price, with all option costs covered by the sale.
The Effect — The downside to this long standing procedure is the shareholder must sell today to take advantage of this aspect of their compensation package. This action leaves the employee with no benefit of price appreciation, which most employees are working for in the first place.
The Solution — Have the lender cover the cash outlay for the option conversion up front, allowing the shareholder to then pledge the newly converted securities for a loan. Once the loan is funded, the lender will subtract the cash outlay from the proceeds and the borrower will now have the right to benefit from their long term interest in that asset.
The Action — When employee options vest, those shareholders are required to pay for the cost of the option out-of-pocket. A shareholder’s only prospect of paying themselves back for the conversion would stem from a sale at current market price.
The Effect — The downside to this long standing procedure is the shareholder must sell today to replenish the cash laid out, all the while trying to take advantage of this aspect of their compensation package. Once again, this action leaves the employee with no benefit of price appreciation, which most employees are working for in the first place.
The Solution — Have the lender pay for the option conversion up front, allowing the shareholder to then pledge the newly converted stock for a loan. Once the loan is funded, the lender will subtract the cash outlay from the proceeds and the borrower will now have the right to benefit from the long term interest in that asset.