Introduction

Securities-backed lending is the practice of lending against the market value of publicly-traded securities (e.g., stocks, bonds, mutual funds, ETFs). A securities-backed loan is a private non-bank loan secured in such a way, using such securities as loan collateral. In short, your client borrows against assets they already own, without selling those assets. Upon pledging those assets, your client immediately receives a percentage (based on the Loan-to-Value ratio) of the market value in cash. When the loan is repaid, your client's collateral is released backed to them.

Red Viking occupies a particular niche with the broader securities-backed lending landscape. Red Viking does not solicit retail business, instead choosing to work directly and exclusively with "advisors" (broadly defined), including but not limited to financial advisors, wealth managers (IFAs, RIAs, CFPs), and family offices. We understand the unique and complex needs of high-net-worth individuals, and function as an "outsourced" lender that specializes in helping advisors like you seamlessly integrate securities-backed loans/securities-backed lending into your product/service offerings.

Suitability of SLBs

Ultimately, determining the "suitability" of a securities-backed loan is for you and your client to decide (in conjunction with legal and accounting advice). In general terms, however, securities-backed loans can be an attractive option for any client looking to access liquidity quickly, without having to liquidate assets in an outright sale. Red Viking loans are "non-purpose," meaning that your client's use of proceeds is essentially unrestricted. Therefore, the potential use cases for securities-backed loans are limitless. Notwithstanding, a few more common client scenarios might include the following:

1. Clients who need capital more quickly than traditional lending avenues can accommodate.
2. Clients who need funds quickly but whose particular situation precludes traditional avenues.
3. Clients (e.g., company founders) who can't sell assets that account for much of their wealth.
4. Clients looking to capitalize on time-sensitive (or not) business or investment opportunities.
5. Clients contemplating making and funding a significant lifestyle purchase (e.g., home, yacht).
6. Clients who are entrepreneurs or business owners looking to build or expand their business.
7. Clients who simply place a high value on the relative anonymity of securities-backed loans.

Strategic Benefits

Securities-backed lending can offer numerous strategic and financial benefits to you and your firm, and perhaps more importantly, to your clients. The major benefits listed below can be distilled down to two basic things: 1) more holistically serving client's broader life goals and financial needs (beyond just their investment portfolios), and 2) becoming an even more valuable (and more competitive) advisor to those clients.

Major benefits for advisors include:

1. Expanded Offerings: By offering securities-backed lending, you expand your product/service offerings to the "other" side of clients' balance sheets, becoming a more holistic and competitive advisor.
2. Enhanced Value-Add: You can increase your value to clients by providing a fast, flexible source of liquidity without dismantling investment strategies, disrupting allocations, or losing market exposure.
3. Increased Revenues: In addition to preserving your assets under management (clients don't actually sell assets), you benefit from a new source of revenues via Red Viking's fee-sharing model.

Major benefits for clients include:

1. Immediate Liquidity: Liquidity, without liquidating. Clients can quickly meet their short-term cash needs while remaining fully invested, and without unwanted triggering capital gains taxes.
2. Beneficial Ownership: Your clients retain most or all (depending on jurisdiction and loan-specific terms) beneficial ownership, most notably capital appreciation and dividend/interest income.
3. Confidential Funding: Securities-backed loans are highly confidential (particularly vis-à-vis bank loans), keeping your clients' private information (e.g., capital needs, funding activity) private.

Collateralization

Most commonly, loans are backed by liquid publicly-traded securities including: 1) stocks and depositary receipts (ADRs/GDRs); 2) bonds (corporate and government, investment grade and high yield); 3) other debt instruments (e.g., CLOs/CMOs); 4) funds and investment trusts (e.g., mutual funds, ETFs, REITs); and 5) "blue-chip" cryptocurrencies and stablecoins (e.g., Bitcoin, Tether). Occasionally, and on a case-by-case basis, Red Viking will consider other less-liquid assets (e.g., fully-vested restricted stock, IPO lock-up shares).

The above applies to securities denominated in multiple foreign currencies and listed on 38 primary-listing exchanges (plus many other regional exchanges) in 31 countries across the Americas, Asia-Pacific, Europe, the Middle East, and Africa. We operate in markets with regulatory, disclosure, and settlement frameworks supportive of cross-border securities-backed lending, as well as political stability, business-friendly policies, established financial markets, and healthy economies. For more, see our Markets page.

Terms and Rates

Red Viking understands that your clients' situations and borrowing needs are unique, so we offer loans of varying durations/tenors and flexible payment schedules. Typical loans are 2-10 years, but we occasionally structure shorter- or longer-term loans. Typically, payment schedules entail monthly payments of principal and interest, but we can arrange quarterly or semi-annual payment schedules, as well as fixed (balanced) or interest-only payment amounts. Because all Red Viking loans are backed by liquid collateral, we offer highly-competitive Loan-to-Value (LTV) ratios and low fixed interest rates (typically 3-9%).

LTVs and Interest Rates

In simple terms, LTV ratios (LTVs) determine how much your client can borrow relative to the market value of their collateral, while interest rates determine how much they pay for that liquidity. LTVs and interest rates are driven by many of the same factors. For LTVs in particular, the driving factors essentially boil down to the risk profile of collateralized assets. As a general rule, the lower the risk, the higher the LTV ratio (and the lower the interest rate). Major factors in determining LTVs (and interest rates) include, but are not limited to:

1. Market value, liquidity (e.g., daily trading volume, daily trading value), and volatility;
2. Asset diversification and concentration risk (e.g., single-stock versus portfolio loan);
3. Quality of the issuer and/or guarantor (e.g., corporation, government, municipality);
4. Sector and industry characteristics (including general and company-specific); and
5. Geography-related factors (e.g., geopolitical risk, currency risk, general market risk).

Lending Process

Working with Red Viking is simple, transparent, and very confidential. You can share your client's situation and needs with us on a no-name basis, and sans any formal paperwork. If and when your client chooses to proceed with a loan application, we request only the bare minimum of personal information (just AML/KYC basics). And, because all Red Viking loans are non-recourse, no background checks or credit checks are necessary, nor do we report to credit agencies (even if your client defaults on the loan).

1. Exploratory Discussions: First, a very informal conversation about your client's needs and goals (on a no-name basis), as well as about their collateral. No fees, obligations, or formal paperwork.
2. Customizing a Solution: Next, we design a bespoke solution for your client. Your client is still anonymous, but we'll need basic information about their collateral (mainly an identifier and an amount).
3. Negotiating Loan Terms: If your client wishes to proceed, you will submit a simple loan application. After a quick review, we will send a non-binding Terms Sheet for you to review with your client.
4. Execution and Funding: Lastly, we execute a final Loan Agreement, your client's collateral is transferred to us, then we transfer the loan proceeds to your client (usually within three business days).