How Banking Instruments And Hard Asset Lending Programs Work

How Banking Instruments And Hard Asset Lending Programs Work

Lending programs were developed to assist clients with either financial instruments (BGs, MTNs, LOCs, CMOs, Insurance Wraps, Treasury Notes, Stock Portfolios and other financial assets) or hard assets (emeralds, rubies, diamonds, gold, silver, copper isotopes, iridium, gold dust, real estate and other assets) to free up a rather frozen, long term asset into immediate cash enabling higher return, short term investments.

The only real requirement is that the asset be assigned and lien-able securing the lenders position.

Most program loans range from fifty million (50,000,000.00) to fifty billion (50,000,000,000.00) and are for a period of one (1) year, this process is usually simple and straight forward, and best of all, quick to fund since many lenders use private funds.

First, the client usually will receive a Memorandum of Understanding (MOU) that details the lending process. If acceptable, the client provides all pertinent and necessary documentation validating ownership, authentication and value for initial review along with the signed MOU. Additional documents may be required, so please treat all lender requests with a time-is-of-the-essence urgency. Upon review of asset quality, the Loan Agreement is presented to client for review and completion. The loan review period is about three to five (3 to 5) business days with a total loan process time of about 30 days till day of funding.

Instrument General Process
If approved, usually the instrument will be purchased and held, or held and blocked, for the Lender’s benefit for the period of one (1) year. The Client has the option to “Repurchase” the instrument at its Full Fair Market Value on the day the Repurchase agreement was Fully Transacted. Upon receiving the block on the instrument, the Lender will wire transfer to the bank the loan proceeds. Depending on the quality of the instrument, the advance against the face value averages sixty to eighty percent (60 to 80) for larger loans up to 50B.

Hard Asset General Process
If approved, usually the client chooses a top rated American or Western European bank that understands asset lending for their specific asset (HSBC is preferred) that is agreeable to both parties. The bank will then create a Line of Credit or SBLC for fifty percent (50 LTV by creating a LOC triggering a mirrored inbound wire transfer with blocked funds that remain in the bank. A bankers dream come true – a no risk loan!

Since this service was created as an expeditious manner for clients to place hard assets into short term, higher yielding programs, lenders prefer the majority – if not all – of the loan proceeds go towards investments. However, they understand that a client may have an immediate capital requirement, so most allow up to 20 or more dedicated to investing.

Lender simple interest rates average from twelve and half percent to twenty percent (12.5 to 20 of asset value 500,000,000
LC/SBLC created in favor of Lender 500,000,000
Lender wires to bank 500,000,000
Client is allowed up to 20% of funds 100,000,000
Cash for investment 400,000,000

If you or a client has instruments or hard assets to lend against that that are assignable and lien-able, this type of loan program may be of assistance to you providing a bountiful returns when placed in secure, higher yielding short term programs, which are readily available.
Article for you by Daniel Bruckner
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