A stock loan is a financial arrangement wherein an investor or borrower, borrows funds by using their existing stocks as collateral. Rather than selling the stocks outright, the investor temporarily transfers ownership of the securities to a lending institution or individual, commonly referred to as the lender. In return, the borrower receives a loan, typically a percentage of the stock's value.
Depending on the lender, they can be at times, a director of a large unlisted or listed company's own stock in the company. This is how billionaires like Elon Musk probably pay less income tax than you and I. As they can borrow against their own stock to fund their purchases of a jet or mansion, they do not have to draw an income.
In Singapore, lenders generally lend against the borrower's personal assets of various stocks or a director's own stock in a listed company. Also, Stock loans are generally not done as a form of program lending(refer to another article of ours for more) and are best left to the directors & officers for to company to apply and enter into, than for example, via a broker.
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