Employee Stock Purchase Plans (ESPPs) are a popular form of employee compensation that allows employees to purchase shares of their company’s stock at a discounted price. ESPPs are typically offered through payroll deductions, and employees can choose to purchase a specific number of shares each pay period. Some ESPPs also offer financing options, which allow employees to borrow money to purchase shares.
Benny is a leading provider of ESPP financing. Benny offers loans to employees who want to purchase shares through their ESPP, and the loans are repaid through payroll deductions. Benny’s loans are typically unsecured, and the interest rates are competitive. However, there are some potential drawbacks to ESPP financing, which employees should be aware of before taking out a loan.
Benefits of ESPP Financing
- Convenience: ESPP financing is a convenient way to purchase shares of your company’s stock. You can apply for a loan online, and the funds will be deposited directly into your brokerage account. You can then use the funds to purchase shares through your ESPP.
- Tax Savings: ESPP financing can provide tax savings. The interest on your loan is tax-deductible, which can reduce your overall tax liability. In addition, the shares you purchase through your ESPP may be eligible for capital gains tax treatment, which can further reduce your tax liability.
- Potential for Growth: ESPP financing can provide you with the potential for growth. The shares you purchase through your ESPP may increase in value over time, which can provide you with a significant return on your investment.
Drawbacks of ESPP Financing
- Debt: ESPP financing is a loan, and you will be responsible for repaying the loan plus interest. If you lose your job or your company’s stock price declines, you may have difficulty repaying your loan.
- Investment Risk: ESPP financing is an investment, and there is always the potential for loss. The shares you purchase through your ESPP may decline in value, which could result in a loss of your investment.
- Missed Contributions: If you take out an ESPP loan, you will be required to make payroll deductions to repay the loan. This could reduce the amount of money you have available to contribute to other retirement accounts, such as your 401(k) or IRA.
Conclusion
ESPP financing can be a beneficial way to purchase shares of your company’s stock. However, it is important to be aware of the potential drawbacks before taking out a loan. If you are considering ESPP financing, be sure to weigh the benefits and drawbacks carefully and make a decision that is right for you.
Kind regards M. Davis.
