NON-RECOURSE LOANS – Q&A FOR SHARES AS COLLATERAL
In many cases, loans involve some sort of collateral. With a non-recourse loan, though, the lender can no longer come after the borrower to make up the additional value of a loan once they have seized the collateral.
After collateral is collected, lenders of recourse loans may still go after a borrower’s other assets if they have not recouped all of their money. With a non-recourse loan, lenders can collect the collateral, but may not go after the borrower’s other assets; in other words, they have no further recourse.
- There is no title transfer of the assets. Even after loan drawdown, the borrower is technically still the owner of the assets.
- Borrower has no personally liabilities, even if the lender sustains a total loss on the borrower’s loan. The lender assumes all risks.
- Privacy of borrowers are ensured, as the borrowers are not personally guaranteeing the loans, so there is no need to disclose the loan to other third parties.
- Borrower’s score remains unaffected, as the borrowers do not have to disclose liability on financial statements or to other lenders, because the borrowers are not required to repay the loan. This in turn helps borrowers increase their liquidity.
- No Credit Review is needed, and there is no limit to how much a borrower can borrow, so long as the borrower has sufficient assets to act as collateral.
There are a number of factors that determines the borrower’s LTV, mainly a detailed analysis of the shares’ public listed company, the performance of the share itself on the market/ burse, the daily trading volume of the shares, and the average price of the shares over the past 3 months.
A typical loan would be 50-60% of the total share value, although higher lending ratios can be arranged for blue-chip company shares.
The loan is disbursed in tranches, and amount of disbursement per tranche is largely determined by the daily trading volume of the shares. The higher the trading volume (the more active the shares), the larger the disbursement amount.
Minimum of USD 50,000 in share transactions per day.
USD 1 million.
Every Quarter (4 times a year)
The Principle is due at the end of the loan tenure (to be re-paid by way of bullet payment/ one lump sum)
There is a minimum lock in period of 3 years, with a maximum loan tenure of 10 years from date of initial loan drawdown.
– To obtain a term sheet, we must first acquire the following information:
a. The Borrower’s FIRST and LAST names;
b. The Borrower’s Email Address;
c. The Borrower’s Contact/ Phone number:
d. The number of shares be made available for the pledging of shares;
e. The Preferred Loan amount;
f. The Shares’ Stock Symbol, and Residing Exchange;
g. The Reason/ Purpose for the loan; and
h. The CDS Statement of Personal Share Holding Statement.
The term sheet will be prepared by CACH’s partners and lenders. Assuming the borrowers are able to provide the list of items required, the term sheet can be ready in a little as 3 working days.
There are a total of 3 parties: The Borrower, The Lender, and The Custodian. The parties are legally bounded via a tripartite agreement.
Because this is a non-recourse loan, as long as the interest is paid promptly, the shares are still reflected as being solely owned by the borrowers under their own names only.
The dividends are paid to the borrowers, as the shares are technically still owned by them.
The Lenders are incorporated in BVI, as such the Lender’s SOPs and loan origination and documentation will be drafted and offered in accordance to British BVI laws, and the enforcement of the loan will be bounded by International Contracts and Loan Agreements Laws.