An SBLOC allows clients to easily unleash the value of their investment portfolio by using the eligible assets as collateral. Whether they need funds to pay off student loans or to purchase a car, boat or anything other than additional securities, an SBLOC enables them to achieve financial wellness, without disrupting their financial goals and investment strategies.
An SBLOC offers highly competitive pricing and access to liquidity. Clients can utilize multiple investment accounts as collateral and combine them into one line. There are no fees associated with the line and clients are only required to pay the interest monthly, provided the SBLOC is in good standing and there has not otherwise been a collateral call.
Financing your daughter’s wedding. Expanding your business. Eliminating your child’s credit card debt. Whether it’s advancing your own life or helping those closest to you, an SBLOC is an empowering tool in your financial tool belt and may give you the ability to finance things you may not have believed were otherwise possible. But it’s only at its most powerful when it’s used prudently and responsibly. Below you’ll find some of the risks that may be associated with having an SBLOC:
Accounts are pledged.You cannot remove cash and/or securities from your pledged accounts without the lender’s authorization. This is a simple process with approval dependent on the amount outstanding on your line of credit and the current value of your pledged accounts.
Potential fees from sale of securities.If securities are required to be sold to settle a collateral call, this may trigger sales fees/other back-end fees from the investments that are being sold within the pledged collateral account. Supernova is in no way responsible for these fees. Additionally, there may be tax consequences to the sale.
Floating rate lines.If your SBLOC is a variable rate line of credit, it is tied to the 1-month LIBOR rate. This rate resets weekly and is subject to change, which means, accordingly, your rate is also subject to change.
Collateral requirement can change.The Lender has the right to change the amount of collateral required at any time without contacting you first.
Demand facilities.Your SBLOC is payable on demand at any time and for any reason.
Not obligated to extend credit.Approval is required for draws on your SBLOC.
Market fluctuations.If the market falls, your assets may lose value and require you to deposit additional securities and/or cash in your pledged investment account or pay down the line. This is defined as a collateral call and could disrupt your investment strategy.
Potential tax consequences.If the lender is forced to sell or otherwise liquidate your securities, there may be tax or other consequences. Lender has the right to sell any securities or other investments you’re holding as collateral and, unless required by law, can do so without informing you first.
Single name taxable accounts, joint name taxable accounts (JTWROS, TIC) if the owners intend to apply for joint credit and all owners on the account will be borrowers on the line, and revocable and irrevocable trust accounts.
Exchange listed equities, unit investment trusts, mutual funds, exchange traded funds priced over $4.00 per share, trusts (revocable and irrevocable), and investment-grade corporate, municipal, and U.S. government bonds.
Retirement accounts, UGMA/UTMA and 529 accounts, business entity accounts, estate accounts, guardian and conservator accounts, accounts for individuals residing outside of the United States and accounts already pledged as collateral to a creditor/lender.
Monthly interest payments can be made by ACH, check or drawing from your SBLOC. You can set up automatic monthly ACH debits from your designated bank deposit account by making this election under “payment preferences” while logged into your account.
You can typically borrow between 0% and 50% of the current value of a diversified, taxable investment account(s) portfolio. Once your SBLOC is set up, we recommend you try to never borrow more than half of that, unless it is for a short-term need after discussing with your advisor.