Your financial requirements are multifaceted, necessitating strategies tailored to your specific needs. Tailored lending can be a valuable addition to a high-net-worth individual’s financial plan, helping you optimize cash flow, maximize tax efficiency and realize important estate planning goals.
As a complement to traditional securities-backed lending options, tailored lending involves customized loan terms to meet specific borrower needs. Customized loan terms may include loan size, rate, structure, repayment schedules and financial covenants.
Tailored lending is typically leveraged in situations where a borrower’s financing needs aren’t met by traditional lending options, or if you have substantial wealth and want to borrow strategically for advantageous outcomes.
Tailored lending collateral
Similar to securities based lines of credit (SBL), tailored lending is a customized credit solution that provides diversification and liquidity without disrupting your long-term financial strategy. Qualifying collateral may include traditional marketable securities, concentrated equity positions, exchange funds, hedge funds, cash surrender value of life insurance, and more.
Assets leveraged as collateral may also include other less liquid or illiquid securities, meaning they’re more difficult to value or sell. This added degree of complexity requires specialized knowledge to structure the loan.
Why leverage borrowing as a wealthy individual
Financial thought leaders often advocate for the benefits of aggressively paying down debts and living without it where you can. But for wealthy individuals, strategic borrowing can offer opportunities – even in market environments with relatively high interest rates.
This is because certain lending options can allow you to keep assets invested – and growing – while also providing you with liquidity access.
Overall, tailored lending can be a useful tool to leverage debt and complement your portfolio, but you need to truly understand whether debt can help you take a balanced approach to liquidity without disrupting your investments, retirement plans or lifestyle.
Where there’s opportunity, there’s risk
Tailored lending can be customizable, but with that flexibility comes a need for more specialized knowledge. That’s where your advisor and their network of professionals can help.
Remember, mandatory legal and regulatory requirements can add complexity to a lending process. As a result, loan documentation and legal agreements must also be carefully completed to ensure they’re accurate and compliant.
While tailored lending under the right conditions can be a powerful tool in wealth creation, it’s important to reach out to your advisor to understand if specific lending opportunities are a good match for your needs.
A line of credit backed by securities may not be suitable for all clients. The proceeds from a line of credit backed by securities cannot be (a) used to purchase or carry securities; (b) deposited into a Raymond James investment or trust account; © used to purchase any product issued or brokered through an affiliate of Raymond James, including insurance; or (d) otherwise used for the benefit of, or transferred to, an affiliate of Raymond James. Raymond James Bank does not accept RJF stock or any securities issued by affiliates of Raymond James Financial as pledged securities towards a line of credit. Borrowing on securities based lending products and using securities as collateral may involve a high degree of risk including unintended tax consequences and the possible need to sell your holdings, which may lead to a significant impact on long-term investment goals. Market conditions can magnify any potential for loss. If the market turns against the client, he or she may be required to quickly deposit additional securities and/or cash in the account(s) or pay down the loan to avoid liquidation. The securities in the Pledged Account(s) may be sold to meet the Collateral Call, and the firm may sell the client’s securities without contacting them. A client may not be entitled to choose which securities or other assets in his or her account are liquidated or sold to meet a Collateral Call. In many cases, the firm may increase its maintenance requirements at any time and is not required to provide a client advance written notice. A client may not be entitled to an extension of time on a Collateral Call. Increased interest rates could also affect SOFR rates (or any successor rate thereto) that apply to your line of credit causing the cost of the credit line to increase significantly. The interest rates charged are determined by (i) the market value of pledged assets and the net value of the client’s non-pledged Capital Access account or (ii) the line of credit amount. Lines of credit are provided by Raymond James Bank. Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. are affiliated with Raymond James Bank, member FDIC. Raymond James and its advisors do not offer tax or legal advice. You should discuss any tax or legal matters with the appropriate professional.
Sources: raymondjamesbank.com; investopedia.com; forbes.com; capco.com
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