One of Lendtable's main offerings is cash advances for employee stock purchase plans, or ESPPs.
What is an ESPP?
An employee stock purchase plan, or an ESPP, is a company benefit that allows employees to purchase shares of their company's stock at a discounted rate.
Eventually, an employee can sell their shares at market rate, meaning they can conceivably make a large profit.
How do I know if I have an ESPP?
When a company offers an ESPP benefit, its benefits administrator or Human Resources department will send out documents detailing the terms of the ESPP. Oftentimes, every employee will receive an informational packet as well as the actual ESPP policy.
Should I participate in my ESPP?
Absolutely. Navigating the finer details of ESPPs can be complicated, but the ROI–or the return on investment—is oftentimes very high due to the discounted price to buy the shares.
How do I apply for Lendtable's ESPP service?
You can apply for our ESPP service similarly to our 401(k) service. Check out what you need to apply in our related support article, What do I need to apply for Lendtable?
Sign up, get approved, and complete the onboarding process.
When you sign up, we will ask for your ESPP policy so our team can go through the details and note the important dates, so you don't have to. You'll also create a password so you can log into your Lendtable dashboard.
If your uploads include all the necessary information, our team will approve your application, and you'll get an email from your dedicated account manager with details on your unique ESPP plan. If your application is missing information we need, it will be rejected, but you can work with our team to reapply.
Link your payment information & Sign your contract
Once you've linked your accounts to pay your $10 subscription fee and receive your semi-monthly Lendtable payouts, you'll be prompted to sign your contract.
Enroll in your ESPP.
You must do this during the enrollment period listed in your ESPP policy, and set your contributions to the maximum amount. Our team cannot do this step for you!
Upload proof of enrollment.
You can do this by forwarding the confirmation email from your employer or by attaching a screenshot the confirmation in an email to your account manager. We cannot release your first payout until you confirm that you've done this.
Your offering period begins, and you receive monthly payouts from Lendtable.
You will receive a reminder email from your account manager when your offering period begins, but no action is required at this time. The portion of your paycheck that will go toward your ESPP will be withheld automatically.
Your monthly payouts will be direct deposited into your linked bank account. They should equal the amount withheld from your paycheck throughout the month. If they do not, email your account manager.
Each month, verify your contributions by sending a confirmation to your account manager.
This confirmation can be a screenshot or a downloaded PDF of your contributions. We cannot release your next payout until you confirm your contributions.
Regardless of if your pay periods occur biweekly, bimonthly, or monthly, we will still release payouts on a monthly basis. Our team will do the math to convert your contribution amounts per pay period to a monthly sum.
Your shares are purchased on the purchase date, and your account moves to the repayment stage.
When your purchase date arrives, your benefits administrator uses the money accumulated during the offering period to buy shares of stock. You can then sell your shares and use the profits to pay for your Lendtable service. Depending on the discount rate, you will generally make a 5-15% profit.
For ESPP service, you will enter the repayment stage after every offering period. Because a Lendtable contract lasts for one year and offering periods may be quarterly or semesterly (shorter than one year), you will likely have multiple repayment periods. This helps you stay on top of your balance throughout the year.
You are often automatically re-enrolled in your ESPP for the next offering period, but we recommend checking with your benefits administrator to confirm this. Since your Lendtable contract lasts for one year, you will want to at least enroll and re-enroll in your ESPP throughout one full year—however, for the best financial outcome, consider re-enrolling for throughout the time you spend at your company!
Now, you're done! Once you sign your contract, you will receive an email that details what to expect throughout the length of your contract. For more information on how to read your ESPP Policy, more details are outlined below:
What is included in an ESPP policy document?
Generally, every ESPP policy document will include:
The discount rate off the market value, usually indicated in a percentage (%).
The maximum amount an employee can contribute from their income to buying shares. This will usually be indicated in a percentage (%) but can be a dollar ($) amount.
Enrollment period dates, during which an employee can enroll in their ESPP.
Offering period dates, during which payroll withholds a portion of each paycheck to put toward buying stock shares during the purchase period. Offering periods can recur quarterly, semesterly, or annually, depending on the ESPP policy.
Purchase period dates, during which the money withheld during the offering period is used to buy shares at a discounted rate. A purchase period is oftentimes a single day. Generally, an employee's newly-purchased shares will be transferred into a brokerage account by the employer.
Lockup period, or holding period, dates, during which an employee cannot sell their shares. Lockup periods come after purchase periods. Not every policy includes a lockup period.
What is the difference between offering periods and purchase periods?
An offering period is when money is withheld from your paycheck and placed in a separate account, until it's used to buy stock on the purchase date. The name purchase "period" can be misleading, since it usually only lasts a single day.
For the most part, the distinction between the drawn-out offering period and the short purchase period is to lighten the burden on whoever is actually doing the purchasing of the shares. This way, the benefits administrator only needs to set aside one day to purchase shares for everyone participating in their ESPP.
Here's one way to think about it: Imagine you are organizing an upcoming event at school or work, and you're in charge of the cash box, which will hold all the money you need to collect from your colleagues to fund the event.
In this situation, the offering period would be the weeks leading up to your event, when you and your colleagues add money to the cash box. Then, the purchase period would be the day you actually take the cash box to the venue, the caterer, the party supplies store, and wherever else you need to buy the necessary assets for your event. It wouldn't be very practical to purchase these things on a rolling basis as the money comes in—it's much more efficient to collect the money over time, then spend it all at once.
Why do ESPPs include a lockup or holding period?
There are a few reasons an ESPP policy might include a holding period:
To encourage employees to stay at the company and contribute to the long-term growth of the company, which would likely increase the stock value.
To discourage employees from selling their shares soon after purchase (also referred to as "flipping" shares).
To ensure a more favorable tax treatment of the shares purchased via an ESPP. Shares of stock that are held for more than one year are treated by the IRS as "long-term capital gains" and are taxed at a lower rate than short-term capital gains. This is why holding periods usually end one year after the purchase date.
To reduce compensation expense under ASC topic 718, a policy within the Accounting Standards Codification that explains how companies should expense compensation for their employees.
If I have a lockup/holding period, am I eligible for Lendtable?
No. In order to make repayment as easy and efficient as possible for our customers, Lendtable does not allow those with holding periods in their ESPP policies to use our ESPP service.
What happens to my stock if I leave my company?
If you leave your company, you will still own all the stock purchased via your ESPP during your tenure, but you will no longer be able to purchase shares on a discount.
Can I re-enroll in Lendtable's ESPP service at a new company if I've already used it while at a former employer?
Yes! To ensure you are eligible, you will have to upload your new ESPP policy for our team to review.