Liquid asset secured financing is a flexible line of credit secured by eligible assets in one or more of your investment accounts. Show
“In essence, your investment portfolio is used as collateral against a loan,” says Vivian Chow, senior vice president and regional banking manager at U.S. Bank. “In a volatile market environment, it becomes more important to not have to liquidate investment assets. This type of financing offers greater liquidity and overall financial flexibility.” How to use your assets as cashLiquid asset secured financing, also known as securities-based line of credit or portfolio line of credit, requires no personal financial statement or tax returns for loans up to $5 million (like most lending options, however, it does require a loan application and underwriting). It offers both consumer and commercial clients attractive interest rates and flexible repayment of principal. In addition, liquid asset secured financing features a streamlined application, expedited approval process and on-demand access to available funds. You can use the cash to meet a wide range of financial needs:
Because this line of credit offers you flexibility and liquidity, it can be particularly useful when you’re presented with a sudden financial opportunity or challenge. In addition, the line of credit may give you better control over your finances. As an example, you may need cash to close on a new home, but your portfolio is down due to market volatility. You don’t want to have to sell securities at a loss so instead take out a line of credit secured by your portfolio to generate the cash needed.
Or, if you’re a small business owner that needs cash to temporarily cover payroll and other expenses, you can take out a line of credit secured by your business or personal portfolio. “Even nonprofit organizations are putting these types of loans into place,” Chow says. For example, in years when donations and grants are not adequate, a nonprofit may have difficulty lining up the timing of projects. Rather than liquidating endowment funds or pursuing more expensive financing to cover operating expenses, a nonprofit can use a portion of the endowment fund as collateral without disrupting overall investment objectives. Considerations with liquid asset secured financingAs with any financing option, it’s important to understand how the current economic environment may impact your ability to borrow and how much it may cost. There are two factors in particular to keep in mind when considering liquid asset secured financing.
Know your optionsEven in times of rising rates or increased market volatility, opportunities will present themselves that may require you to access additional funds. Your banker can help you determine if liquid asset secured financing is right for you. “We show clients a number of options that may help prepare them for these types of situations,” Chow says. “In times of economic uncertainty and market volatility, providing clients access to cash without disrupting their investment goals is important.” Learn about U.S. Bank Wealth Management Banking services. Which of the following are considered sources of short term financing?The main sources of short-term financing are (1) trade credit, (2) commercial bank loans, (3) commercial paper, a specific type of promissory note, and (4) secured loans.
Which of the following is an example of a restrictive short term financial policy?Some examples of restrictive short term financial policies include: low investment in inventory, low cash balances, and few credit sales.
What is short term finance primarily concerned with?Short-term financial management concerns current assets and current liabilities or working capital and operating cash flows. A company must be able to meet all its current liability obligations when due. This involves having enough current liquid assets to avoid disrupting a company's operations.
Are the major source of unsecured short term financing for business firms?Businesses obtain unsecured short-term loans from two major sources, banks and sales of commercial paper.
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