A Breakdown of Restricted Stock Units
So what are restricted stocks and how do they work? To begin let’s define what exactly a restricted share is. A restricted share is a stock issued to an individual or party with definitive conditions that apply to either the acquisition or sale of its shares. Until the conditions laid out and agreed upon by the issuing and receiving parties are met, the stock or shares of restricted stock are not fully transferable. Upon meeting the defined conditions the restriction is lifted and the stocks become available for trade or sale by the controlling party. Utilization of restricted stock is commonplace in large companies and typically are issued to workers either as compensation in lieu of salary or as a means to incentivize workers within the company.
The conditions upon these restrictions tend to be very specific, some common examples of conditions that must be met are:
- Earning goals
- Vesting periods
- Acquisition and/or restructuring within company
So why are companies keen on restricting shares that they commit to their employees or insiders? There are a myriad of reasons why a company might choose to restrict the shares they are pledging but some of the more prevalent basis for doing so include:
- Determent of untimely or premature selling
- Continued employment
It is important to note that the nature of a restricted stock is a promised asset rather than an actual stock and hence they do not provide voting rights while the shares are still restricted. Vesting plans devise when shares of restricted stock will become vested – the point at which they are released to the acquiring party and gain market value. Once vested the shares of stock become income and consequently can be withheld towards income tax while the rest are released to the receiving part who can then do with them as they wish.
Can My Restricted Stock Qualify Towards a Loan?
While it can be tricky to find a lender that will work with restricted stock units, it is not impossible. In fact, Easy Stock Loans understands this peril better than anyone and that is why we have erected a system to allow you to leverage your vested restricted stock towards a loan. Many factors must be taken into account when qualifying for any type of loan and loans against restricted stock units are no different. Understanding and meeting the standard requirements is an excellent place to start if you wish to pursue a loan against your restricted stock. These qualifications include but are not limited to credit history, income, work stability and existing debt – though individual circumstances will certainly play a role in the consideration of any of these qualifications.
If you wish to pursue a loan via restricted stock shares don’t hesitate to contact us at Easy Stock Loans. Our team is more than happy to evaluate your situation and help you determine if you meet the qualifications to be eligible for such a loan. Give us a call at +1 866-867-7585 or fill out our application form here – Apply Now – to get started.