SLS Insurance Policies as Collateral
Posted: Thursday, April 28, 2005
by NGursoy
SLS Insurance Policies as Collateral
-Useful Hints To Project Owners Who Need Funding-
-SLS Policies as Collateral - · Collateral provides 100% security over a 10-year amortization period (plus various structuring methodologies can be utilized to significantly mitigate interest rate exposure if so desired by lender).
· Polices pay face value and go directly to the lender , who becomes beneficiary upon possession of policies (if someone dies or policy gets paid off, the lender receives full face value so the principal is continually being paid down).
a) The worst case is that in the 8 th year the policies are paid off in full and no more interest is due.
b) The best case a 10% conversion rate per year, meaning the loan will go the full 10-year term instead of being retired early.
· The SLS policies cannot be contested because they are beyond the contestable period (2 years).
· Impossible for the policies to lapse. An escrowed premium account is set up and kept in force on every policy.
· The process is strictly regulated by escrow and the lender may chose the escrow/law firm used.
The Process (For Illustration Purposes Only)
1. The Lender puts X amount of $'s in escrow (for instance, if client seeks $3.5 million, then $10 million would be placed in escrow)- -NOTE: The Escrow Account is in the Lender's bank.
2. The SLS Owner deposits X amount of SLS in escrow (in this instance $10 million) in the same bank. The policies are legally verified and legally converted over to the Lender in escrow. NOTE: no funding disbursements are released to the Client until verification and legal conversion occurs.
3. After legal verification, the collateral is fully in place and only then does the lender release the funds to the client (in this case approximately $3.5 million)
4. The balance of that $10 million is used to pay the premiums and keep the policies active until they pay off the loan.
a) another portion of that money can be used to mitigate the Interest partially or in full. In essence, the bank does not lose any money.
b) The Interest rate charged by the bank is negotiated between the borrower and the bank.
Please note that we will only respond to clients with bankers. The Borrower is required to have a Business Plan and submit an Executive Summary before a dialogue will be permitted between the SLS owner and the borrower's bank.
Projects such as gambling/gaming of any type, alcohol, tobacco, etc. are not acceptable for the utilization of SLS collateral.
FACT: Each day, over $100 million in SLS Policies are for sale on the Secondary Market. Although a number of brokers are attempting to sell these policies, there are very few reliable and reputable parties that can collateralize loans. Banks, private lenders and investors are all acceptable.
For additional Information, contact: ng.investments@gmail.com Nihat Gursoy
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