A
family member recently started a new job and told me about a benefit
the company offers to buy company stock that I hadn't heard of before.
He is allowed to take out a company loan (min $10,000 in $2,500
increments) at a fixed 3% interest to buy company stock. Furthermore if
he hits certain performance targets, the company will forgive up to 5%
of the loan balance each year. It wasn't clear if there was a cap to
the loan amount.
This benefit seems very different than traditional Employee Stock Purchase Plans
(ESPP) offered by many large companies to encourage ownership among
employees. Initially, I am really on the fence as to how beneficial
this is. It sounds tempting if the company appears to be attractively
valued and you were considering an investment in the company anyway.
However, if the company is fairly priced all this will do if push you
towards being more overexposed to your employer's stock performance
than you otherwise should be.
Just like my employer's ESPP, this is a benefit that on the surface is not necessarily a no-brainer.