Equities First Holdings is a global alternative lending and financing company based in Indianapolis. The company also provides financing to shareholders. As of July, 2016 the company has observed traction in stock based loans and margin loans. One of the chief causes is the current economic climate that has caused banks and other lending institutions to tighten lending criteria. This scenario has led to a rise in equity lending. Equity lending is attractive for borrowers who need to raise funds fast and cannot qualify for traditional credit score based loans. Even though banks offer some lending solutions for such individuals, they have become expensive as most banks are cutting lending options to borrowers, increasing interest rates and tightening loan qualifications.
Al Christy, Founder and chief executive of Equity First Holdings, views loans collateralized by shares and stocks as an inventive lending mechanism. Another advantage of stock based loans is that they have a high loan to value ratio compared to margin ratio and are offered with fixed interest rate. This provides the lender with certainty through the duration of the loan period. Margin loans are particularly vulnerable to market fluctuations. Stock based loans on the other hand provide a hedge as the borrower is lowering their investment risk if the market goes downside. Additionally, stock based loans use a nonrecourse feature that permits borrowers to leave a stock loan at any point in time. Borrowers are allowed to do this even if the stock has depreciated and they get to keep the loan’s initial proceeds.
Equities First Holdings was founded in 2002 to provide the public with alternative lending solutions. The company specializes in supplying capital using public stocks as collateral. The company has completed over 600 transactions that are worth approximately $1.4 billion. Stock based loans have risen in popularity as they offer loan to value rations of 50 to 75 percent compared to 10 to 50 percent for traditional margin based lending.