Securities-Based Lines of Credit Provide Flexible Financing for Recovery Needs and More

Sean McHale, October 6, 2021

In the wake of Hurricanes Ida and Nicholas, you may be among those in the region who need immediate cash to address recovery needs. It could be you’re waiting for an insurance check to cover home repair costs and need funds in the meantime. Or maybe that check is only going to cover damage to your roof or basement, and since you’ll be vacating your home during repairs, you want to renovate the kitchen too and need more funds for that.

 

Securities-Based Lines of Credit

 

If you need immediate financing and have assets such as stocks and bonds to put up as collateral, a low-cost, easy solution to consider is a Hancock Whitney securities-based line of credit (SBL).

Fast and easy to establish

The advantage of an SBL is you can establish it much faster than alternative types of credit, such as mortgage loans or home equity lines of credit.

SBL set-up is streamlined because it requires no real estate appraisals or title insurance, you don’t have to negotiate terms and conditions, and there are few covenants. If you have the securities to adequately collateralize your line, you can typically set it up in a matter of days rather than weeks. Your Private Banker will define "adequate collateral" for you.

Low-cost financing

SBLs are inexpensive compared to other types of loans because they are short-term — you typically renew them annually — and they are low-risk for the bank because we hold your securities as collateral.

As low as mortgage interest rates are today, rates on SBLs often are even lower.

A simple path to the funds you need

To open an SBL, you must have an investment account with marketable securities. The collateral can’t be in a qualified retirement account like a 401(k).

After you apply for the SBL, we determine a dollar amount for the line of credit based on some percentage of the value of your eligible securities portfolio. If you are approved, you sign collateral and pledge agreements. Then, any time you want to access cash, you just call your Private Banker and have funds transferred to your checking account that day.

Utilizing the line of credit is subject to the condition that your eligible securities continue to meet applicable loan-to-value ratios. The value of your eligible securities will be monitored during the life of your loan and you may be required to provide additional collateral if their value decreases such that your outstanding balances are no longer sufficiently secured.

For emergencies and opportunities

In addition to being easy to set up and less expensive than most alternative types of loans, SBLs allow you to use your assets — your stocks and bonds — without having to sell them and trigger taxes. You secure the financing you need and your investments continue to work for you.

SBLs can be used to pay for things other than emergency needs created by disasters. They’re also great at providing cash to enable you take advantage of spur-of-the moment opportunities where you need to act fast. For example, we’ve had clients use their lines to move in front of other buyers and make quick offers for things like yachts and recreational vehicles when they come on the market.

So, if you need cash to help you recover from the recent hurricanes — or you just want to establish easy access to cash any time you need it without having to sell off assets* — talk to your Private Banker to learn more about a securities-based line of credit.

 

*Proceeds from a securities-based line of credit cannot be used to purchase marketable securities such as stocks and bonds. Also, market corrections could result in a significant decline in your collateral and may require that you put up additional collateral or may result in a liquidation of your pledge collateral, resulting in tax consequences.

The information, views, opinions, and positions expressed by the author(s), presenter(s), and/or presented in the article are those of the author or individual who made the statement and do not necessarily reflect the policies, views, opinions, and positions of Hancock Whitney Bank. Hancock Whitney makes no representations as to the accuracy, completeness, timeliness, suitability, or validity of any information presented.

This information is general in nature and is provided for educational purposes only. Information provided and statements made should not be relied on or interpreted as accounting, financial planning, investment, legal, or tax advice. Hancock Whitney Bank encourages you to consult a professional for advice applicable to your specific situation.

Investment products and services, such as brokerage, advisory accounts, annuities, and insurance are offered through Hancock Whitney Investment Services, Inc., a registered broker/dealer, member FINRA/SIPC and an SEC-Registered Investment Advisor.

Hancock Whitney Bank offers other investment products, which may include asset management accounts, as part of its Wealth Management Services. Hancock Whitney Bank and Hancock Whitney Investment Services Inc. are both wholly owned subsidiaries of Hancock Whitney Corporation.

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