Backed by

Combinator

Securities-backed lending. Reimagined.

Get 1% - 3% lower interest rate for your clients, and eliminate pledged account paperwork and delay

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Interest rate for your clients

5.30%

SOFR + 0.40%

Loved by independent financial advisors

Low cost liquidity solution for all your clients

Our interest rate is typically 1% - 3% lower than existing products on interest rates, with low minimums.

Schwab Pledged Asset Line

SyntheticFi

Interest rate

SOFR + 2.40% - 4.40%

SOFR + 0% - 0.40%

Minimums

$100,000

$10,000

Paperwork

Pledged account adds paperwork

No extra paperwork

Tax-deductibility of interest expenses

No, except for limited scenarios

Always tax deductible

* Rates are floating based on a fixed spread tied to the Secured Overnight Financing Rates (SOFR). Excludes SyntheticFi management fees.

Integrated seamlessly with your stack

Our entire onboarding process is fully digitalized. No wet signature needed.

Custodian-agnostic solution

We support major custodians such as Charles Schwab. Your client don't need to move their assets.

Streamlined process

No credit check needed. No wet signature. Clients only need to sign a single application DocuSign package.

TAMP and SMA support

SyntheticFi supports existing money managers, such as SMAs, UMAs and TAMPs.

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Frequently Asked Questions

How is SyntheticFi able to offer a lower interest rate than other lenders?

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SyntheticFi offers a low interest rate by eliminating expenses and fees charged by custodians like Charles Schwab. Instead of negotiating interest rates with Charles Schwab, we help you directly access the institutional borrowing market on stock exchanges for your clients.

We do this with a strategy called box spreads. Read more about box spreads here.

What are box spreads used by SyntheticFi?

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SyntheticFi uses "box spreads" constructed from listed S&P 500 Index options. You can think of box spreads as standardized loan contracts traded at stock exchanges. They have competitive pricing from the bid-ask process on the stock exchange. Read more about box spreads here.

Is it a line of credit, or is there a term duration?

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SyntheticFi works like a line of credit. Your client can keep a balance open, potentially indefinitely. There are options to lock in a fixed interest rate too.

This line of credit is implemented with a month-to-month box spread strategy. That means every month SyntheticFi will implement a new box spread to take out a loan from the stock exchange, paying back the expiring box spread loan if needed.

How does repayment of the loan work?

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We recommend clients to make interest-only payments to cover the interest expense from each month. They have the option to include the interest from each month in the loan principal.

Client can pay off the loan arranged by SyntheticFi at any time. They do so by depositing the payment in their own brokerage account, and instructing SyntheticFi to exit the box spread loan from the market.

What are the minimums for using SyntheticFi?

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SyntheticFi has a much lower minimum compared to other lenders of securities-backed loans. Our minimum loan size is $10,000.

How long does it take to set up SyntheticFi and withdraw money?

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SyntheticFi takes about 1 week to onboard a client. Once onboarded, the client can withdraw money at any time.

What can my clients use the funds from SyntheticFi for?

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There is no limit on the purpose of the borrowed funds.

What fees does SyntheticFi charge?

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SyntheticFi charges 0.50% of the amount borrowed by the client on an annual basis. This fee is subject to volume discount and case-by-case negotiations.

For example, if a client borrows $100,000 for 6 months, they need to pay a management fee of $100,000 * 0.50% * 6 / 12 = $250.

How much can my client borrow with SyntheticFi?

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In general, you are allowed to borrow up to 50% of your non-retirement investments. We are happy to review the specific portfolio of your clients to give you a definitive answer.

What are the risks from using SyntheticFi?

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SyntheticFi has comparable margin call risk as margin loans or securities-backed line of credit.

Because SyntheticFi uses box spread options to reduce the cost of borrowing, there are additional risks:

- Interest-rate risk: Box spreads used in the SyntheticFi Securities-Backed Lending Program involve a fixed payoff on a future date, which functions like a zero-coupon bond. It has the same interest rate risk as any other fixed-income investment.

- Execution risk: In extreme market conditions (e.g. market closures) or due to technical difficulties, SyntheticFi might fail to roll over the box spreads due to lack of liquidity in the market. In this case, the client will automatically take out a margin loan and may need to pay margin interest, until execution is restored.

Have more questions?

Schedule a video call with one of our licensed professionals.

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