Advantages and disadvantages of ESPP financing

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Benny is a fintech that offers Employee Stock Purchase Plan (ESPP) Funding that makes it easier for employees to participate in their company's ESPPs.

A ESPP is a financial arrangement that allows an employee to purchase company stock (usually at a discounted price) through payroll deductions. Due to the low prices, employees are very likely to make a nice profit on their investments.

However, ESPPs limit the period in which you can buy and sell shares, which can impact your personal cash flow.
Benny provides you with loans that allow you to participate in your ESPP and still pay all your bills. As long as the investment pays off, you're at an advantage. That's how Benny works.

• Provides investment funding so you can participate in your ESPP
• Repayment of your short-term loan when you sell your shares
• Enjoy the benefits of financial gains without sacrificing your lifestyle

What is Benny?

Benny manages ESPPs and matches employees with funding opportunities so they can maximize the “instant” gains an ESPP can provide. ESPPs offer unique financial benefits, but many people cannot afford to participate because they require the majority of their salary.

Benny has a solution where he not only manages your ESPP account but also arranges loans for you so you can maximize this benefit.

What does it offer?

As mentioned, Benny connects ESPP account holders with funding options that allow them to take full advantage of the ESPP without having to settle for a lower salary. Here's more about how it works and how employees can benefit from it.

Invest and spend at the same time

Benny’s key value proposition is ESPP funding and can be summarized in three steps:

1. Register for your company’s ESPP: The first step is to join your company's ESPP program, which allows you to purchase company stock at a discount not available to the general public.

2. Receive deposits into your bank account: Because ESPP contributions are deducted from an employee's paycheck, many people are unable to participate in this otherwise generous employee benefits program. Benny works by offsetting the ESPP deduction with a cash advance of the same amount.

3. Receive your stock profits and repay the cash advance: At the end of the ESPP enrollment period, the employer purchases the ESPP shares for its employees at a discount of up to 15%. At that time, the employee can realize the immediate gains on the shares and use those funds to repay the cash advance owed, plus any applicable fees.

The end result is that the employee was able to purchase a significant amount of company stock at a discounted price without having to pay for the purchase out of his or her own pocket.

Get paid regularly

Benny “pays” you out on a regular basis. Every time you top up your ESPP, Benny transfers an appropriate amount to your checking account. The result is that you don't feel financially constrained even though you top up your ESPP account.

Borrow money at the best conditions

Benny doesn't lend money to its customers. Instead, it connects them with lenders who offer the best possible interest rates. In today's high-interest environment, interest rates can be quite high. But as inflation falls, interest rates could become more reasonable.

Manages your ESPP account

Unlike most well-diversified retirement accounts, you shouldn't accumulate huge amounts in your ESPP. Putting too much money into a single company's stock can mess up the asset allocation of your overall portfolio and increase your risk.

Benny fully manages your ESPP, including allowing you to sell your company shares so you can pay off your loans and enjoy the extra money.

Are there any fees?

Benny clients pay $7 per month for Benny's management fee. You also have to pay interest on any money you borrow from Benny's partners. Interest rates are pretty high right now, so be careful with these loans. You may find that the guaranteed profits barely cover the cost of the loan. It's worth noting that the website has a discrepancy regarding their fees. In some places it says $7 and in others it says $12. The personalized quote I was sent showed a fee of $7.

How does Benny compare?

Because not many organizations offer ESPP funding, Benny doesn't have many direct competitors—Lendtable may be Benny's only notable competitor.

Credit table works with a longer list of companies than Benny. However, the fees are much higher. In fact, you could pay a lot more at Lendtable. The company used to charge a monthly fee of $10, but that increased to $50/month starting March 2024. Additionally, Lendtable charges a flat fee for ESPPs equal to 35% of the stock discount you receive.

Asset front does not offer ESPP funding, but it does offer automated investing for a low annual portfolio fee of 0.25%. You can have an individual or joint taxable account or multiple types of IRA Accountsincluding traditional, SeptemberAnd Roth IRAIf you prefer to fund your ESPP yourself but are looking for another affordable investing app for the rest of your portfolio, Wealthfront is a solid choice.

Benny undoubtedly offers an innovative product, but you should still consider alternatives to an ESPP financing model.

In an ideal world, you would financial cushion that is large enough to allow you to get by on a lower income for a few months. Once you have that cushion, you can buy and sell your employer's stock and reap all the benefits. Another option is to use a low-interest Credit card to cover your expenses. However, this is risky as you may

How do I open a Benny account?

To open a Benny account, request a personalized offer via the sign-up page. Provide your email address, a password, your employer and your current salary. Benny will send you a personalized offer to your inbox within two days. If you want to proceed, you will need to sign up for your ESPP and link both your ESPP and your bank account.

Is it safe and secure?

We couldn't find Benny's privacy and security policies on their websites. It's clear that Benny uses a step-by-step registration process to ensure you never provide more information than is strictly necessary at the time. To start with, you don't even provide your name or address. If you decide to use Benny, you'll need to go through the sign-up verification process and connect your accounts.

Benny is a fintech company and its partners are subject to a banking standard, meaning Benny must comply with a variety of laws. In 2023, it helped its employees save more than $1 million, and the venture-backed company has money to spend on security and infrastructure. In all likelihood, using Benny is relatively safe, but identity theft is a real risk, especially with newer companies.

How can I contact Benny?

To get in touch with Benny, email him at support@heybenny.com or call 608-302-6665. The company also offers a chat on the website. The chat is only open during business hours.

Is it worth it?

Benny offers a free guide explaining how to get the most out of your ESPP. If you don't understand your ESPP, sign up and use this resource. However, interest rates on ESPP loans are currently quite high. Most likely, the money you can make through interest rate arbitrage isn't worth the risk. If you lose or quit your job, you'll still owe money, but you won't have the gains from your ESPP to offset the cost of the loan. That could result in hundreds of dollars in losses for you.

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