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Using Credit to Preserve and Build

If you own substantial liquid assets, either in a business or in your investment portfolio, you might not see any reason to borrow money. Why take out a loan when you already have funds available to you?

There are a number of situations, however, where there could be a distinct advantage to utilizing a line of credit, even if you have sufficient personal resources available:

  • To cover large or unexpected personal expenses;
  • To help grow your business without incurring additional expenses;
  • To take advantage of an investment opportunity

Though it may seem counterintuitive, borrowing can be beneficial to your overall wealth plan and investment strategy.

Covering the Big Thing

Dealing with large or unexpected expenses can be challenging, whether you need to pay for a major tax bill, an emergency medical expense or fund an investment opportunity. Your first inclination may be to draw from your savings or sell off some investments to raise the funds. While this may seem straightforward, there can be hidden costs that aren't immediately obvious to you.

By liquidating investments, you are likely to incur brokerage fees and may expose yourself to additional tax consequences in the form of capital gains. Right away, the transaction is costing you money. And it doesn't end there. By liquidating investments, you also risk throwing your asset allocation off balance, which can impact your long-term wealth plan.

Studies have shown that over 90% of a portfolio's variance of investment return can be attributed to how assets are spread across different asset classes. A properly tuned asset allocation ensures that you're able to pursue the level of growth you want while exposing yourself to a level of risk you are comfortable with — and selling investments can upset that balance.

Furthermore, rebalancing may require you to sell off more assets in order to get back to your desired asset allocation, thus incurring more fees and capital gains tax. On top of all this, you have to consider the opportunity cost of taking money out of the market — you'll miss out on any potential growth that you would have enjoyed had the money remained invested.

Leverage is Key

Rather than selling investments, you may want to consider using your portfolio or other assets as collateral for a loan. That way, you can borrow against your assets while allowing them to continue to generate use and returns, which could more than offset the overall cost of the loan given the current interest rate environment is still relatively low.

This strategy isn't just for unexpected or obligatory expenses. You can use it to pay for major purchases, as well.For example, you may have your eye on an expensive work of art or the vacation home you've been dreaming about, but don't have the cash on hand to buy it. Perhaps you're expecting a big bonus in several months, and are worried that you'll miss out on a unique opportunity if you wait. If that's the case, you could leverage your portfolio to secure a bridge loan that provides the cash you need immediately, allowing you to make the purchase now and repay the debt later when your cash flow improves.



Leverage for a Business

You can also borrow against your personal investment portfolio to help your company make an acquisition, purchase equipment or buy real estate to house the firm and the like.

By leveraging the portfolio, higher interest rates for business loans costly legal and accounting fees closing costs etc can be avoided.

As a result, as the company repays the loan more profits are enjoyed by the owner. And because the investment portfolio is fully invested in the market, there is the ability to capitalize on portfolio positions.

Capitalizing on Opportunities

Our Private Placement team in Europe is uniquely positioned to leverage global resources and to match our clients' financing objectives. These skilled specialists have significant experience in proprietary principle investment desks.

Private Placement Products

The Private Placement structures complex transactions across the capital spectrum to optimize the capital structure where often these solutions involve a hybrid of debt and equity. The products are geared to match client needs where the focus is principle protection and above market returns. We serve both individuals and institutions.

For institutions, certain principle guarantees may be required, in some cases humanitarian projects may be the goal and for individuals generational wealth may be the goal. In all cases, customized structured programs can be uniquely tailored to match the client's requirements.

Private Placement Process

We work within the framework of the clients' objectives for the best possible structured program where only cash or cash backed instruments will be considered. What is required: KYC containing Ownership, History of Funds, Authority to Verify, CIS and Passport. A Tear Sheet no less than one week old will be needed and Titleholder must represent that he/she is the legal and beneficial owner of the funds; that the funds have been legally acquired and; the funds are free and clear of any liens, past due taxes or encumbrances.

We will then execute due diligence and follow up with any questions and if required, ask for additional supportive documentation. Upon successful due diligence, we will then issue a program contract where the contract term can be multiple years.


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