What is a Stock Loan? A Complete Guide for Shareholders

If you own shares in a publicly-traded company, you may be sitting on significant wealth—but that wealth is locked up. You need liquidity, but selling your shares gives up future upside. A stock loan offers an alternative: borrow against your shares while keeping ownership.

What is a Stock Loan?

A stock loan (also called a securities-backed loan) allows you to use your publicly-traded securities as security for a loan. You transfer the shares to the lender for the loan term, receive cash, and repay the loan over time. When you've repaid the loan in full, you get your shares back.

How Does a Stock Loan Work?

The process is straightforward:

1. Submit your information — ticker, share count, contact details
2. Portfolio assessment — we evaluate your shares and determine eligibility
3. Term sheet — you receive a formal, non-binding offer with loan amount, LTV, rate, and term
4. Documentation — loan agreement and transfer documents executed
5. Share transfer and funding — shares transferred, funds wired to your account

The entire process typically takes 7-10 business days.

Key Characteristics of Stock Loans

Non-Recourse Structure

This is perhaps the most important feature. A non-recourse stock loan means your only security is the stock itself. If you cannot repay the loan, the lender keeps the shares—but cannot go after your other assets (home, car, bank accounts).

This is fundamentally different from a traditional loan or margin loan, where you're personally liable for the full debt.

No Credit Check Required

Stock loans are approved based on the quality and liquidity of your securities, not your credit score or income. Your stock portfolio is your credit.

Fixed Interest Rates

Most stock loans come with fixed interest rates for the loan term, providing predictable payments. You know exactly what you'll owe each month.

Potential Upside

Shares are returned at current market value when you repay. The loan is settled based on repayment, not the original share price.

What Can You Use a Stock Loan For?

Stock loan proceeds can generally be used for:

• Personal liquidity needs (real estate, tuition, etc.)
• Business investments or working capital
• Portfolio diversification
• Exercise stock options before expiration
• Any legitimate purpose (subject to loan agreement)

Since this is a general purpose loan, there is no restriction on use of proceeds except for purchasing shares of the same stock.

Who Uses Stock Loans?

Stock loans are commonly used by:

• Company founders who want liquidity without losing ownership
• Early investors in public companies with concentrated positions
• Executives and insiders with restricted stock
• Angel investors who need to rebalance portfolios
• Shareholders in micro-cap stocks who can't get margin loans
• Anyone who wants liquidity without selling their position

What Types of Securities Qualify?

Stock loans are available for a wide range of securities:

• Common stock on Nasdaq, NYSE, and 52+ international exchanges
• Microcap and OTC-listed shares (OTCQX, OTCQB, Pink Sheets)
• Restricted and Rule 144 shares

Is a Stock Loan Right for You?

A stock loan might be a good fit if:

• ✅ You have publicly-traded securities worth at least $50,000
• ✅ You need liquidity but don't want to sell
• ✅ Your shares aren't eligible for a traditional margin loan
• ✅ You're comfortable with the risk of losing shares if you can't repay

A stock loan might NOT be right if:

• ❌ You need the shares for voting rights during the loan term
• ❌ Your financial situation can't support regular interest payments
• ❌ You expect the stock to decline significantly and couldn't afford to lose the shares

Next Steps

If you're considering a stock loan, the best next step is to get a term sheet. This free, no-obligation offer will show you exactly how much you can borrow and at what rate.

Have questions? Contact SLS Group at 866-446-1009 or info@slsgroup.com