Borrowing
Any shareholder of a private company partnered with Prism qualifies to borrow, if they are a citizen or legal resident of the United States. This includes founders, current employees, former employees, and investors of our Partner Companies.
Prism connects shareholders of private companies with liquidity from lenders that would likely otherwise be inaccessible.
For borrowers, loans through Prism offer the following benefits:
- Access liquidity years before an IPO or acquisition
- Pre-negotiated terms with ready-to-go liquidity providers
- Lump sum cash in your pocket, to be used for nearly any purpose
- Keep your shares, and your future upside in those shares
- Defer taxes (for most borrowers)
Loan proceeds can be used for nearly anything. Common use-cases include the down payment on a home, paying off high interest debt, exercising stock options, and diversifying you investment portfolio. Any specific limitations on use of funds are listed in individual loan agreements.
Loan proceeds cannot be used for a business purpose that is directly related to the company whose stock is used as collateral for the loan, as this would be considered a business loan. For example, funds borrowed using Company X stock could not be used to buy raw materials for Company X's factory.
Prism lets you access liquidity via borrowing, instead of selling your shares.
If you sell, you potentially face tax consequences from your realized gains (you also forfeit the benefit of any future appreciation in the value of those shares).
If you take a loan, for the majority of borrowers, the transaction should not be considered a taxable event and thus should not have a direct impact on your tax burden.
For your specific tax situation, please always consult with your tax advisor.
Rates and fees are dependent on credit market conditions, Prism’s underwriting of companies, and demand from lenders. If you have shares in a company partnered with Prism, you can check your pre-qualified offers in our platform to see current borrowing costs.
Non-recourse loans are not reported to credit bureaus.
Pledging Shares
Prism offers loans (using shares as collateral), but not sales of shares (we are not a secondary trading marketplace). Borrowers pledge their shares as collateral for a loan and maintain ownership of those shares.
Title ownership of your pledged shares does not change. Prism partners directly with your company to ensure control over the portfolio that holds the collateral shares for the duration of the loan.
No, you can choose to use any number of shares as collateral. The amount of collateral you pledge will affect the loan offers available to you, including the total amount you can borrow.
Yes. Additional shares can be used to originate a new loan.
Repayment
Loans are repaid based on the payment schedule provided in the loan agreement. Loans typically have a period of interest-only payments followed by either a balloon repayment or an amortized period during which the principal is gradually paid down.
If the Partner Company becomes public (through an IPO, SPAC, Direct Listing, Reverse Merger, or other mechanism), after the lockup period (if applicable), Prism can sell and/or transfer the appropriate number of shares in order to satisfy the repayment amount (principal + accrued interest). Any excess shares and cash will be returned to the borrower.
In the event of an acquisition, any cash proceeds will be used towards the repayment amount. Any shortfall can be met by selling the received shares. Excess shares and cash will be returned to you.
No, Prism loans can be repaid at any time with no prepayment penalty.
Partner Companies
Prism loans are only available to shareholders of our Partner Companies (private companies that partner with Prism to verify shareholder information and authorize lending transactions). To qualify, a Partner Company must be privately held and registered in the United States. Partnership is ultimately subject to underwriting by Prism.
If your company is available on our platform, then you have nothing to worry about. We only lend to shareholders of our Partner Companies, and that partnership includes lifting restrictions for Prism lending transactions.
Prism does not offer financing backed by shares of publicly traded companies at this time.
