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A Securities Backed Line of Credit Account is a bank line of credit that is backed by securities held in a portfolio. With a Securities Backed line of credit in place, cash needs can be met without disrupting a carefully constructed investment plan. The line can be accessed to pay taxes, tuition, facilitate a real estate purchase or provide a safety net for unexpected expenses.
A Securities Backed Line of Credit provides unparalleled flexibility, convenience and access.
Flexibility – A Securities Backed Line of Credit provides access to funds without disrupting investments, investment strategies, asset allocation or creating unexpected tax consequences.
Convenience – A Securities Backed Line of Credit is accessible by wire transfer.
Access – Loan information is available 24 hours a day/7 days a week.
LOAN STRUCTURE
Loans issued under this program are lines of credit collateralized by a portfolio of eligible securities - stocks, bonds, mutual funds. The loan term is perpetual. The borrower is billed for interest on a monthly basis. Payments against principal may be made at any time at your discretion.
INTEREST RATES*
Securities backed lines of credit feature a tiered interest rate structure determined by the outstanding loan balance. The tiers reflect a margin either above, equal to or below the Prime Rate as published in the Wall Street Journal. The rate will change on a periodic basis to reflect changes in the Prime Rate. There is no charge for the unused portion of the line of credit.
CREDIT LIMITS*
Credit limits are based upon the quantity and type of underlying collateral. Securities that meet certain quality standards, are readily marketable and publicly traded qualify as acceptable collateral, however not all securities meet these standards (please contact The Bancorp Bank, N.A. or your investment advisor for specific details). The credit limit is determined by multiplying the acceptable collateral value by the “advance rate” associated with the individual security or mutual fund’s asset class. Lines backed by portfolios allocated across asset classes will be segmented with the appropriate advance rate assigned to each asset class. The line of credit is subject to credit approval.
| ASSET CLASS |
ADVANCE RATE |
| Equities & Mutual Funds |
50% |
| Investment-Grade Fixed Income |
80% |
| Treasuries |
90% |
| Cash and Equivalents |
100% |
| *Note: Certain conditions apply: |
- The Bank may reduce the credit limit if, in its sole discretion, it determines that the value of the collateral is no longer sufficient. For example, if market fluctuations produce a significant loss of value in the collateral account or if the reallocation of assets from an asset class with a higher advance rate (such as fixed-income) to one with a lower advance rate (such as equities) results in insufficient collateral value, the credit limit will be reduced accordingly.
- The securities used for collateral are restricted. Approval is required for certain transactions.
- The terms, loan structure and pricing of the Securities Backed Line of Credit Program are subject to change upon The Bancorp Bank's discretion.
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For more information or to determine if a Securities Backed Line of Credit is appropriate for you, please contact your The Bancorp Bank, N.A. representative or your investment advisor.
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