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Portfolio loan question
Old 07-28-2023, 03:09 AM   #1
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Portfolio loan question

Hi guys/gals
Iím looking to purchase a franchise and was looking to use my stock portfolio loan to fund the business from Charles Schwab. The interest rate is about 7.25% and is variable. I was looking to possibly use around $100,000 -200,000. This will be use over time as needed. Hopefully I donít have to use a lot. Just wondering if this is a good idea. Seem like it might be better than an sba loan.

I did thought about using my 401k rollover to fund the business, but rather not tap into my retirement.
Any thoughts?

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Old 07-28-2023, 06:59 AM   #2
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Not enough info to make suggestions. There are likely better ways to raise the capital needed and I am not familiar with the workings of a portfolio loan at Schwab. How far out on the risk spectrum is this Franchise? Someone with more knowledge on this type of loan will chime in.


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Old 07-28-2023, 07:12 AM   #3
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Little confused, do you have a stock portfolio other than your 401k?
When I borrowed against my taxable stock, I moved it to IBKR because their rates were much lower to borrow. It is a margin loan, I was told try to keep the loan well below 50%, so that if the market drops, you don't get a margin call.
So, You can margin you taxable stock and borrow against your 401k. I don't know if all plans allow you to borrow against them, so check that out.

1. Can a loan be taken from an IRA?

Loans are not permitted from IRAs or from IRA-based plans such as SEPs, SARSEPs and SIMPLE IRA plans. Loans are only possible from qualified plans that satisfy the requirements of 401(a), from annuity plans that satisfy the requirements of 403(a) or 403(b), and from governmental plans. (IRC Section 72(p)(4); Reg. Section 1.72(p)-1, Q&A-2)
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Old 07-28-2023, 08:21 AM   #4
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Sounds like what you are considering is a Pledged Asset Line or what Schwab calls a Securities-Based Line of Credit. You're asking if its a good idea to use something like that to fund a business venture - how can we possibly advise you with so little info.

You probably know that the risks of using this type of credit are very similar to a margin loan - the loan may be demanded/cancelled at any time if the value of the collateral falls below a certain threshold. Also, your securities may be liquidated to satisfy a collateral call. On top of that it's variable rate, so your borrowing costs could go up materially in the future.

So, looks to me like you're using a high risk type of financing to fund a high-risk investment = high risk all around.

You mentioned using a 401K rollover for funding. Not sure what you meant by that. Are old enough to avoid penalty - otherwise there is a 60 day grace period. In any event, if you are old enough, and you miss the deadline, the WD will be taxable.

Need a lot more details to address your questions.
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Old 07-28-2023, 10:47 AM   #5
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Yeah, using a margin loan in this situation is probably neither wise nor necessary. I'd shop a few small SBA-approved banks and credit unions, explaining what you need and asking for suggestions. A couple hundred $K and a borrower with good assets should not be a heavy lift for any of them. A HELOC credit line might be an option but I don't know about the deductibility of the interest.. Same question for the margin loan, of course. Good luck.
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Old 08-01-2023, 10:34 PM   #6
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Since we're to the point of discussing loans, let me assume you have done ALL your research on the ins and outs of the franchise you are considering. Lots of franchises don't w*rk out, so be prepared to lose everything. YMMV
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