Exchange Loan
Liquidity
What's the best way to get liquidity from my shares or options?
Exchange Loans are fast, easy and can deliver more after-tax cash than a stock sale while still giving you long-term upside in a portfolio of leading pre-IPO companies
Transact immediately
Initiate Exchanges and Exchange Loans immediately. Exchange Loans fund as soon as 3 business days after the Exchange is completed.
Pay no taxes
Exchange Loans do not trigger any tax obligations. As a result, many clients receive more after-tax cash from an Exchange Loan than they'd get to keep from a stock sale.
Riskless to you
Exchange Loans are non-recourse to the borrower. This means you never have to come out of pocket to repay them.
Talk to a Collective Liquidity representative
Our representative is happy to answer all your questions.
Tax deferred liquidity for unicorn shareholders
Employees and shareholders of late-stage, venture-backed private companies (“unicorns”) often find it difficult to obtain liquidity for their stock or options. Online marketplaces typically require lengthy negotiations with the buyer and over half the proceeds can go to pay taxes and commissions. There are lenders that make loans against shares but they lend only a small percentage of the value of the stock and their fees can be prohibitive.
Collective Liquidity has created a unique solution. Exchange Loans provide shareholders of pre-IPO companies with both immediate liquidity and long-term wealth creation.
- More Upfront Cash. Exchange Loans can generate more immediate after-tax liquidity than a stock sale
- Long-term Wealth Creation. You receive a partnership interest in a diversified portfolio of leading unicorns
- Quick and Easy. Exchange Loans can fund within 3 days of shares transferring into the Fund
How an Exchange Loan works
For many unicorn employees, Collective can be the best way to monetize their stock and diversify
Exchange into the Fund
Exchange your stock tax-free for a partnership interest of equal value in the Collective Exchange Fund, our diversified portfolio of leading unicorns like yours
Example
If you hold $100,000 worth of shares in one of the companies in our Eligible Companies, you can exchange your shares for a $100,000 partnership interest in the fund. This diversifies your holdings and reduces your risk.
Get an Exchange Loan
Then, with a non-recourse Exchange Loan, receive a tax-free loan for up to 60% of the value of your partnership interest at any time
Example
In our example, you can immediately borrow $60,000 (less interest) with an Exchange Loan. And because you don't sell your partnership interest for the money - you just borrowed against it - your partnership interest continues to appreciate in value over time.
Redeem your Fund Interest
When the time is right for you, redeem your partnership interest to pay off your loan and keep any leftover value - earning you even more in a tax efficient manner
Example
Finally, if you decide to redeem your partnership interest when it is worth $150,000, the proceeds would pay off your loan and leave you with an additional $90,000 in cash. The total liquidity to you would be $150,000 (the $60,000 from the Exchange Loan plus the $90,000 in redemption proceeds after paying off your loan). This is substantially more than you might have expected from a stock sale.
Liquidity Estimator
Compare your potential after tax liquidity to a classic brokered stock sale
Exchange Loan
Stock Sale
Exchange Loan
More about Exchange Loans
Non-Recourse
Exchange Loans are non-recourse to the borrower. In the event the value of your Exchange Fund partnership interest becomes less than the outstanding amount of your loan, you can always choose to turn over your partnership interest to satisfy all of your obligations to the lender. You never need to come out of pocket to repay an Exchange Loan.
Tax Deferral
Unlike stock sales that can be taxed at state and federal ordinary income rates as high as 46%, exchanges of stock into the Fund and Exchange Loans do not trigger capital gains taxes. As a result, many unicorn shareholders get more after-tax liquidity from an Exchange Loan than they'd receive from a stock sale.
Redemption of Partnership Interest
After the first year, you can redeem your Exchange Fund partnership interest for cash at the end of any quarter. Proceeds from your redemption payoff your Exchange Loan and you keep whatever is left over. This is why an Exchange Loan provides both immediate cash and the opportunity for long-term wealth creation.
No Payments
The interest on Exchange Loans is collected from the loan proceeds when it funds so there are no monthly payments. When your Exchange Loan matures, you can redeem your partnership interest and pay if off with the proceeds, pay cash or just refinance it with another Exchange Loan.
Loan Terms
- Loan Amount: up to 60% of the value of Exchange Fund partnership interest
- Interest rate: 9.9% annually
- Interest payments: reserved from loan proceeds; no monthly payments
- Loan origination fee: 2% of loan amount
- Stock fee: none
- Prepayment penalty: none
- Term: 1 year; refinancing available