The modern lending industry is highly stratified. At the absolute bottom rungs of the business, one will find many well-established companies that specialize in lending to those with poor to fair credit. These operations, such as payday loan or title loan companies, are usually optimized to get cash into people’s hands as quickly as possible. But they often charge usurious interest rates and high fees.
On the other extreme of the lending spectrum, you have big-money lenders, which normally consist of major investment banks and various kinds of venture capital firms. These deals often involve eight-figure amounts or higher and can be highly complex, sometimes taking months or even years to hammer out agreements. While such options can make sense for established companies or those who have the entrepreneurial talent to impress bigtime private lenders, high-finance lending solutions are simply not going to be available to the vast majority of borrowers, including those who plan on using the funds to build businesses.
With solutions at the top and bottom of the lending market, the middle is left out
The lending industry has traditionally lacked a mechanism for relatively affluent people who are not quite playing in the financial big leagues to quickly raise needed unrestricted capital. The go-to solution has been home or other equity lines of credit, with unsecured, credit-based lending a distant second.
However, there are many compelling reasons that people may not want to take out an equity line of credit against their primary residence or commercial buildings that they may own, including the possibility of losing the property in the event of default. And traditional business loans tend not to solve this problem, usually being collateralized by real estate as well.
Additionally, equity lines of credit and mortgage-based lending is often complex, extremely time consuming and risky for the borrower. In addition to the possibility of having the underlying collateral liquidated, those looking for high-dollar real estate equity loans or second mortgages will often be faced with multiple hard credit checks and the possibility of many rejected applications. And most real estate equity lines of credit have clauses that pull the entire credit line should real estate values deteriorate significantly.
The closing times on second mortgages and equity lines of credit are often measured in months. All these things can make such options unattractive when timely funding is essential.
Equities First Holdings bridges the gap between fast retail lending and high finance
Equities First Holdings has created a solution to fill this gap in services for those seeking five-, six- or seven-figure loans or higher and who want the rapidity of payday loans, the low rates of the best home equity loans and the approval rates of title loans.
With its stock-based lending model, Equities First Holdings has hit on a lending method that can get serious cash into the hands of borrowers in days or even hours while offering almost unbelievably low rates, usually as low as 3 to 4 percent.
Equities First Holdings allows those with significant equity holdings and other securities to almost instantaneously raise large amounts of capital through pledging those securities as collateral. This lending model has a number of distinct advantages, including high loan-to-value ratios that are usually around 75 percent, competing with the absolute top-end ratios that may be found in real estate equity loans and lines of credit.
But unlike HELOCs and other equity-based lending schemes, Equities First Holdings’ model does not put irreplaceable, critical personal assets at risk, such as cars, homes or spaces occupied by a family business. In fact, EFHs loans are almost all non-recourse. This means that only the value of the pledged collateral can be liquidated in the event of default. If there is still an outstanding balance, the borrower is not personally liable to cover the balance.
Furthermore, EFH loans are not called in when the collateral’s total value falls below a certain threshold as is the case with traditional margin lending. EFH is able to avoid the potentially catastrophic margin call through its sophisticated approach to analyzing markets. The company is able to take advantage of organic market trends in order to minimize its own lending risk. And this ultimately translates into offering its borrowers interest rates that are as low as many top-rated corporate bonds.
Who can benefit from EFH loans
Perhaps one of the best features of EFH loans is that they are not purpose specific. Many banks will require borrows to disclose exactly what the loan they are seeking will be used for. And the higher the loan amount, the more likely it will be that the bank will demand to know exactly what the funds will be going towards.
This can add layer upon layer of headache-inducing paperwork and compliance burdens for borrowers who need amounts of six figures or higher, especially in the context of growing a business where flexibility is often key.
EFH loans completely eliminate the requirement of purposing the funds. With EFH, there are no drawdown schedules, deadlines or other burdensome ongoing paperwork that the borrower will have to comply with. An EFH loan will usually be approved and the cash transferred to the borrower’s account within a day or two. The process itself is strikingly close to payday lending, except with rock-bottom interest rates and loan amounts as high as eight figures.
Tailor made for self-starting entrepreneurs
Anyone with significant equity holdings can use EFH’s lending services for literally any purpose they want. However, the biggest winners from using this groundbreaking company, whose total lending is rapidly approaching the $2 billion mark, have been self-starting entrepreneurs.
There are many reasons why an entrepreneur with a company in the nascent growth stages might want to stay away from equity financing or other venture capital funding sources. These include not wanting to bring in partners and not having to answer to people who may have little understanding of the industry.
EFH can make it possible for such entrepreneurs to raise significant capital themselves, retaining complete control over the future of their company while benefiting from lending rates that are usually on par with AAA senior corporate debt.
As EFH continues to expand its operations across the globe, there is little doubt that increasing numbers of entrepreneurs will flock to its low-risk, high-reward lending model.