Choosing a Stock Loan Provider: 21 Questions Every Shareholder Should Ask

By Altivolus Capital Partners | Altivolus Stock Loans

Imagine you’re a founder with a €200 million stake in a listed company. You have agreed to buy a logistics facility for €90 million, and you intend to vote at the annual meeting next month. Two lenders send proposals. Both quote 6%. One will put €85.5 million in your account after fees. The other hasn’t said who gets to vote the pledged shares. Which proposal lets you buy the building and cast your ballot?

You can’t tell yet. But you know exactly what to ask next.

In this guide, a stock loan means borrowing cash against publicly traded shares. For a major shareholder, choosing a provider means tracing three things through the life of the deal: the cash, the shares and the authority to make decisions about both. Bring these questions to the first meeting. As the transaction progresses, write the relevant clause or independent confirmation beside each answer. Our example begins with understanding the following: Through Alder Quay Holdings Ltd., the founder owns €200 million of shares in publicly listed Alder Quay Logistics and is comparing two loan offers to fund a €90 million property purchase ahead of the logistics company’s annual meeting.

First, find out who is across the table

1. Which legal entity will owe me the money at closing?

Ask for the full legal names and jurisdictions of the lender, introducer, custodian and any agent authorized to act for them. Have the lender identify the entity that signs the commitment, the entity that sends the cash and the person authorized to bind each. If the quotation carries a familiar group name but the agreement names a subsidiary, ask what obligation, if any, the parent assumes.

2. How can I verify the provider and the people contacting me?

Verify incorporation in the relevant corporate registry. Separately, ask which regulatory permissions the proposed activity requires in each relevant jurisdiction and have counsel check the answer. If a firm claims authorization, match the legal name, permitted activities, website and telephone number to the regulator’s own record. Then call using independently sourced contact details. The UK Financial Conduct Authority documents cases in which impersonators copied genuine firms’ registration numbers. A real number can appear on a fraudulent email. FCA guidance on clone firms

3. Where will the funding come from, and what still has to be approved?

Ask whether the lender will fund from its balance sheet, draw on a committed facility or seek a third party after you sign. Request evidence appropriate to the transaction and permission for your counsel to verify it. Have the lender mark every outstanding condition, including credit approval and any dependence on a transfer or sale of your shares. If your acquisition deposit becomes nonrefundable on Friday, an indicative term sheet with credit approval pending leaves you bearing that timing risk.

4. Who earns a fee if I proceed, and who gets paid if I walk away?

Request a written schedule naming each recipient, payer, amount or calculation method, and payment date. Include lender-paid referral fees and any legal, diligence or custody deposits. For advance expenses, establish the work covered, the refund terms and the account receiving payment. Independently verify instructions before sending funds, especially when an email announces a last-minute change.

Work out how much cash the shares can support

5. Are my particular shares eligible to be pledged?

Give the lender the ticker, exchange, share class, quantity and identity of the legal holder. A founder may own ordinary shares personally, hold another block through a company and have already pledged part of the position. Ask which shares the lender will count. Have your advisers check existing liens, shareholder agreements, lockups, insider policies and any approval or disclosure obligations before you authorize a transfer.

6. How much will you advance against a block this size?

Ask the lender to show its sizing calculation and identify the constraint that binds. It might be opening loan-to-value (LTV), trading liquidity, issuer concentration or an internal credit limit. For example, if €10 million of stock trades on an average day, a €200 million position represents 20 average days of total traded value. That figure describes scale. It tells you little about the price achievable if a large block must be sold quickly. Ask which trading window and venues the lender uses and how it handles unusually busy days.

7. Which price and exchange rate determine my borrowing capacity?

Request the valuation source, observation time, currency and any discount the lender applies to market value. A €200 million block given a 10% valuation haircut has an eligible value of €180 million. At an opening LTV of 50%, that supports €90 million. If one proposal quotes a higher advance percentage, compare the eligible values underneath it. For a loan in a different currency from the shares, ask for a worked example in which the share price holds steady and the currency moves against you.

8. How much usable cash arrives on funding day?

Request a closing statement that starts with gross principal and ends with the wire to your account. Identify deducted fees, retained reserves, prepaid interest and conversion costs. In our founder’s example, assume a €90 million loan and a 5% origination fee deducted at closing, with no other deductions.

Origination fee = €90,000,000 × 5% = €4,500,000

Cash received = €90,000,000 − €4,500,000 = €85,500,000

To complete the €90 million purchase, the founder contributes €4.5 million from a separate cash account. Property acquisition costs also come from that account. Increasing the loan to cover the gap would exceed the assumed 50% opening LTV. Ask whether interest accrues on the full €90 million and when any reserve can be released.

9. What will this loan cost over the period I expect to use it?

Ask each lender to price the same draw amount, currency and repayment date. Get a dated schedule covering interest, benchmark resets and floors, custody charges, minimum-interest periods, prepayment premiums and principal repayment. Assume the full €90 million remains outstanding for one year and interest is paid in cash.

Annual interest = €90 million × 6% = €5.4 million

First-year financing cost = €5.4 million interest + €4.5 million fee = €9.9 million

Cost as a percentage of cash received = (€9.9 million ÷ €85.5 million) × 100 ≈ 11.58%

That is a simple cash-cost comparison assuming full repayment after one year and no other charges. A formal annualized rate depends on payment dates and the applicable calculation method.

10. Can this borrower use the proceeds for the intended purpose?

Describe who receives the wire, who buys the asset and how the money moves between them. If the founder borrows personally but a property company buys the facility, ask whether an onward loan or equity contribution is permitted. Get the intended use approved in writing and check any continuing reporting requirements. Restrictions can be product-specific. For example, the US securities-backed lines of credit described by the SEC and FINRA restrict the use of proceeds to purchase or trade securities. Read the use-of-proceeds clause in your own agreement. SEC and FINRA investor alert

Follow the shares into custody

11. Am I granting a security interest or transferring legal title?

Ask counsel to trace ownership immediately before closing, after funding and after an enforcement event. With a pledge, the lender takes a security interest in the shares. A title-transfer arrangement puts legal title with the recipient and may leave you relying on a contractual obligation to deliver equivalent shares. Ask counsel to identify your rights if the recipient becomes insolvent and to review tax consequences in the relevant jurisdictions. The phrase “keep your shares” is too imprecise to answer either question.

12. Where will the shares sit, and whose instructions can move them?

Ask for the custodian’s legal name, the account title, a specimen statement and the custody or account-control agreement. Verify the arrangement directly with the custodian. Ask who can instruct a sale or transfer today, what changes after default, and whether the custodian must check that a default actually occurred. An account can bear your name while giving another party significant instruction rights.

13. Can anyone sell, lend or repledge the shares before a default?

Ask the lender and custodian to identify each permitted use of the collateral. “Repledge” means using your collateral to secure another obligation. If reuse is permitted, ask who receives the shares, what you can verify, and how the lender will deliver equivalent shares at payoff if its counterparty fails. If a provider promises the shares will stay put, find the restriction in every relevant agreement and check for exceptions.

14. Who gets the dividends, votes and corporate-action elections?

Take the date of the next shareholder meeting and ask who will receive the proxy materials, who can give voting instructions and by what deadline. Then run through a cash dividend, a rights issue and a takeover offer. Who receives notice? Can you exercise a right that requires new cash? Does a dividend reach your bank account or reduce the debt? Ask your tax adviser whether any substitute payment receives different treatment. For a founder facing a close vote, the answer about one record date could decide whether to proceed.

Rehearse a bad trading week

15. What precisely triggers a collateral call?

Get the threshold, test frequency, valuation rules and treatment of accrued interest in writing. Then use the contract’s definition of eligible collateral. Suppose the €90 million balance stays constant, the initial haircut stays at 10%, and the stock falls 25%. All values are in euros.

LTV (%) = (outstanding loan ÷ eligible collateral value) × 100

If this hypothetical agreement triggers a call above 65%, the decline breaches the threshold. Ask how the lender values shares during a trading halt and whether it can increase the haircut or change eligibility while the loan is outstanding. Either change can matter even on a day the share price barely moves.

16. How much must I deliver to cure a call, and by when?

The trigger tells you when action starts. The cure target tells you how far back you must go. Suppose the agreement above requires a return to 60% LTV. Assume prices and exchange rates stay constant during the cure. Compare two alternatives.

The second amount is after any haircut. Ask when the clock starts, which time zone applies, whether your transfer must be initiated or settled by the deadline, and what happens if prices move again. At the same 10% haircut, €15 million of eligible value would require approximately €16.67 million in additional shares at market value. The founder has already pledged the full €200 million block, so this option requires other eligible assets. Now put yourself in the founder’s shoes. The purchase has already absorbed €4.5 million of your own cash, plus acquisition costs. Where will the €9 million come from on short notice?

17. What else counts as default, and when can shares be sold?

Ask for the full list of defaults, including missed interest, a breach of a representation, a default on another debt or a change of control. Have the lender distinguish events with a cure period from those permitting immediate action. For a sale, ask who chooses the timing and venue, what costs are deducted, how the sale price is documented and when surplus proceeds reach you. Request a sample statement showing the order in which sale proceeds pay expenses, interest and principal.

18. What does “non-recourse” cover in this agreement?

Ask counsel to point to the exact limit on recovery and read it alongside guarantees, indemnities and exceptions. Give the lender a number: after enforcement and costs, €80 million is available against €90 million owed. Can anyone pursue the borrower, a holding company or a guarantor for the €10 million shortfall? Repeat the question assuming a representation about ownership of the shares was inaccurate. Ask for the clause that explains any difference. Even where recovery is limited to collateral, losing the pledged block can mean losing a decisive vote.

Plan the last day before signing for the first

19. Can I repay early, and can the lender demand repayment early?

Put two dates on the table: the stated maturity and the date you would repay if your acquisition refinanced in six months. Request a payoff calculation for both. Check minimum interest, break fees, notice periods and partial-release terms. With the same €90 million balance, six months of simple interest at 6% is €2.7 million. If the entire 5% fee is nonrefundable and there are no exit charges, the six-month financing cost is €7.2 million. The founder still needs a source for the €90 million principal repayment. Then reverse the question. Identify any demand feature, lender termination right or mandatory repayment event. If the business plan depends on several years of funding, find out exactly what secures that runway.

20. If funding stalls or the lender fails, how do I recover my shares?

Ask for a step-by-step closing sequence showing when the custodian blocks the shares, when the lender becomes obliged to fund and what releases the block if the wire misses its deadline. Separately, ask local counsel what rights survive lender or custodian insolvency, which law governs the collateral, where disputes are heard and whether a claim could require action in another country. A promise of next-day release deserves particular scrutiny if only the missing counterparty can authorize it.

21. After my final payment clears, exactly how and when do I regain unrestricted control?

Ask for a sample payoff letter and release instruction. Identify who calculates final interest, who confirms receipt, who removes the lien or returns equivalent securities, and how many business days each step takes. Get the escalation contact and the evidence of completion. For our founder, the finish line is a custodian confirmation that the full position is available in time for the next transaction or vote.

Take the term sheet for a test drive

Before choosing between providers, hand both the same three scenarios: the purchase closes on Friday, the stock drops 25%, and you refinance in six months. Ask each lender for the cash you receive on Friday, the amount and deadline of any cure, and the total cost and share-release date on early repayment. For the founder, add a fourth line: who can instruct the vote on the record date, and by what deadline? A blank cell is an open negotiation point. A clause reference, a calculation and a named person responsible for acting give you something you can verify.

For an initial conversation about an eligible international shareholding, have the ticker, exchange, available share count and desired liquidity ready. Altivolus Capital Partners, operating as Altivolus Stock Loans, acts solely as an introducer to independent third-party lenders. The lender underwrites the transaction, sets the terms and contracts directly with the borrower. Altivolus may receive a referral fee from the lender if an introduction results in financing. Request an introduction through Altivolus Stock Loans

This article is for general education. The figures are hypothetical. Review the actual financing, custody and security documents with independent legal, tax and financial advisers familiar with the jurisdictions involved.