Borrower Protection

We’ve got your back.

It’s not about buying the things you can’t afford. It’s about a better way to pay for the things you already can afford. We want to ensure you get the most out of your BriteLine while also keeping your hard-earned investments working for you.

Why do we do this?

While some things, such as market volatility, are out of our control, that does not excuse us from taking every step possible to help protect your money. We do this because the benefits of a BriteLine are some of the greatest in borrowing – and we want you to enjoy those benefits while understanding the steps taken to mitigate the risks.

What can happen?

If a borrower has an outstanding balance at or near their credit limit and then the market drops significantly, it triggers a collateral call. On a BriteLine, your credit limit is determined based on 50% of the current value of your investment portfolio. A collateral call will occur if the outstanding balance of your BriteLine is greater than 70% of the current value of your pledged investment portfolio.
If this were to happen, the borrower is required to either pay down the line, deposit cash or pledge additional securities into the investment account, or sell assets from the investment account and pay down the line. Supernova can also liquidate assets in your pledged investment portfolio at its discretion in the event of a collateral call.

The Stoplight System

Our goal is for no borrower to be in a collateral call situation. This is a lofty goal – but one we take very seriously. This is why we’ve got your back with our Stoplight System. It is our recommendation you draw no more than 25% against your portfolio, or 50% of your available BriteLine. That will help you keep it in the green where your odds of facing a collateral call situation are extremely low. So low that if your investments were 100% in the S&P 500 Index, you wouldn’t have been in a collateral call in the Flash Crash of 1987, the Dot-Com Crash of 2000, or the 2008 Great Recession.
Few in the industry goes to this level to help protect you.

Keep It in the Green

It’s as easy at sounds. Three colors to help you clearly monitor the status of your BriteLine in relation to your hard-earned assets. This can be accessed every time you log in to your BriteLine portal. This keeps you in control and eliminates the hassle of having to personally monitor your investments daily in relationship to your line.

Here’s how it works:

%

Green

Outstanding Balance of
0-25%
of Your BriteLine Credit Limit

%

Yellow

Outstanding Balance of
26-40%
of Your BriteLine Credit Limit

%

Red

Outstanding Balance of
41-50%+
of Your BriteLine Credit Limit

Here are some examples:

%

Green

Collateral

$1,000,000

BriteLine

$500,000

Balance

$250,000
Your collateral can fall to $357,143 before triggering a collateral call.

%

Yellow

Collateral

$1,000,000

BriteLine

$500,000

Balance

$400,000
Your collateral can fall to $571,429 before triggering a collateral call.

%

Red

Collateral

$1,000,000

BriteLine

$500,000

Balance

$500,000
Your collateral can only fall to $714,286 before triggering a collateral call.
Green
Outstanding Balance of
$0 – $250,000
At a 25% draw, it would require a 64% drop in your collateral to trigger a collateral call.
How likely is a 64% drop in my portfolio?
While all portfolios have different risk levels and this could happen, a 64% decline is a very low probability event if your portfolio is diversified across different markets.
Yellow
Outstanding Balance of
$250,000 – $400,000
At a 40% draw, it would require a 43% drop in your collateral to trigger a collateral call.

How likely is a 43% drop in my portfolio?

A 43% drop is still a low probability event if diversified across various asset classes. However, it is not impossible. From August of 2000 to September of 2002, the S&P 500 index fell almost 48%. The NASDAQ did far worse than that. Approximately seven years later, the S&P 500 fell about 58% from October, 2007 to March, 2009.

If borrowing in the Yellow Zone, be sure to work with your advisor to understand the potential shocks that could come to your portfolio. If you are in a lower risk portfolio, such as one mainly invested in high quality bonds, the Yellow Zone perhaps is still a low risk position. If invested in an all equity portfolio, it is perhaps a riskier position.

Red
Outstanding Balance of
$400,000 – $500,000
At a 50% draw, it would only require a 28.5% drop in your collateral to trigger a collateral call.

How likely is a 28.5% drop in my portfolio?

The average bear market on the S&P 500 is approximately 35%. It is important that if you must borrow at the Red Zone level that you work with your advisor to stress test your portfolio for potential shocks that may occur in the future.

We recommend that borrowers in this zone have a preference to lower risk assets, such as bonds, and take at least a 40% weighting to these low risk asset classes. As always, there is no guarantee in investing and investors should always understand that investing takes risk.

* Your BriteLine credit limit fluctuates based on the current value of your pledged investment portfolio. You can view your current credit limit at any time by logging into your account on our website and see whether your status is green, yellow, or red.

213 W Institute Pl., Suite 408
Chicago, IL 60610
(312) 470-6280

Supernova Lending, LLC is a subsidiary of Supernova Companies, LLC. Nationwide Multistate Licensing System (NMLS): 1543400.

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