Can You Borrow Against Private Company Shares? How Share-Backed Lending Works

Yes, it may be possible to borrow against private company shares. Shareholders in unlisted businesses can potentially pledge their equity as collateral to raise liquidity without selling their stake, although this is a specialist form of lending and availability varies considerably between lenders.

For founders, executives and early investors whose wealth is concentrated in a private company, share-backed lending may provide a way to access liquidity while retaining ownership of the underlying shares, subject to lender criteria and the terms of the facility.

This guide explains how these loans work, who may qualify, how much you may be able to borrow, the factors that influence pricing and LTV, the risks involved and how to approach the lending process.

What is a loan against private company shares?

A loan against private company shares is a form of securities-backed lending, also known as share-backed or equity-backed lending. It allows a shareholder in an unlisted business to use their holding as collateral for a loan, potentially raising capital without selling the shares.

It differs meaningfully from borrowing against listed shares. Public equities are generally easier to value and liquidate, whereas private shares have no public market, can be harder to value and may carry restrictions on transfer. Lending against private shares therefore sits within a specialist part of the market served by private banks, credit funds and specialist lenders.

If your holding is in a listed company, a single stock loan or Lombard loan may be more appropriate. For unlisted holdings, an unlisted stock loan may be considered.

Who can borrow against private shares?

Borrowing against private equity may be considered by:

• Founders and co-founders raising capital ahead of a funding round, acquisition or IPO.
• Executives and employees with significant vested equity or options.
• Early investors and angels holding stakes in maturing private companies.
• Pre-IPO shareholders seeking liquidity before a potential listing.

Lenders may favour shareholders with decision-making control or influence, a meaningful percentage holding and a company with a credible potential liquidity event. Minority shareholders may also be able to borrow, although terms and availability depend heavily on the size of the stake, the company and the lender.

How much can you borrow against private company shares?

The loan-to-value (LTV) available depends on the strength of the company, the nature of the shareholding and the lender's assessment of the collateral. As an indicative guide:

Company / holding profile	Indicative LTV
Early-stage, limited financials, minority holding	Around 15% to 25%
Established private company, solid financials	Around 25% to 40%
Strong financials or credible near-term exit	Potentially higher, subject to bespoke lender assessment

The exact figure is influenced by factors including the shareholder's percentage and level of control, the company's financial performance, any anticipated liquidity event, previous funding-round valuations and restrictions on transferring or pledging the shares.

These figures are indicative only and do not represent terms that will necessarily be available to an individual borrower.

What interest rates and terms apply?

The cost and structure of a facility against private company shares depend on the risk and illiquidity of the collateral, the borrower, the jurisdiction and the proposed structure.

Facilities may be structured with fixed or variable pricing, while some pre-IPO arrangements can involve rolled-up interest or an equity participation component payable on exit. The headline interest rate is therefore only one part of the overall cost.

Terms are often short to medium term and may be structured around an anticipated exit, but this varies between lenders. Borrowers should consider the total cost of borrowing, including any arrangement, legal, valuation, custody or other applicable fees.

How the process works

1. Initial review. You share details of the holding, the company and how much you are looking to raise.
2. Lender selection. A specialist broker identifies lenders with potential appetite for the company profile and proposed structure.
3. Valuation and due diligence. The lender assesses valuation, transferability and liquidity outlook. Legal checks may cover the articles, shareholder agreements and any pre-emption or transfer restrictions.
4. Structuring. LTV, pricing, term and security arrangements are agreed, subject to lender approval. Shares may be pledged or held in escrow or an SPV rather than transferred outright, depending on the structure.
5. Drawdown. Funds are released once the lender's conditions have been satisfied. Timescales vary according to the complexity of the transaction, documentation and valuation process.

See how Enness has approached lending against private shares.

What do lenders look for?

Lenders assessing a loan against unlisted shares may focus on three key areas:

• Valuation, evidenced by recent funding rounds, third-party appraisals or company financial information.
• Transferability, including whether shares can be pledged or moved into an SPV or escrow and what the company's articles and shareholder agreements permit.
• Liquidity outlook, including whether there is a potential exit event such as an IPO, acquisition or secondary sale, or continued investor interest.

Beyond the collateral, lenders may consider the borrower's wider profile, including net worth, other assets, family wealth and overall financial strength.

Which lenders offer loans against private shares?

Facilities against private company shares are generally arranged through specialist private banks, private credit and debt funds, family offices and boutique lenders. Appetite can vary depending on the company's sector, stage, financial performance and the size and nature of the shareholding.

A specialist broker can help identify lenders whose criteria may be appropriate for a particular company and structure, although any facility remains subject to lender assessment and approval.

Why borrow against private shares instead of selling?

Depending on the circumstances, borrowing against private shares may allow a shareholder to:

• Retain ownership and continued exposure to the company's performance, subject to the risks associated with borrowing against the shares.
• Avoid an immediate disposal, although the tax consequences of borrowing and any future disposal should be considered with an independent tax adviser.
• Access capital for a specific financial requirement, subject to lender criteria.
• Fund a property purchase, tax liability, new venture or other opportunity, where the proposed use of funds is acceptable to the lender.
• Structure borrowing around a potential exit, where the lender is comfortable with the proposed repayment strategy.

Borrowing against shares is not risk-free. If the value of the collateral falls or the borrower does not meet the terms of the facility, the lender may have rights over the collateral in accordance with the loan agreement.

Borrowing against pre-IPO shares

Pre-IPO lending is a specialised area of share-backed finance. Where a company is expected to list, lenders may assess the credibility and timing of the proposed IPO and structure the facility around the anticipated liquidity event.

Some facilities may include rolled-up interest or an equity participation component payable on exit. Holdings in venture-backed companies with a credible potential liquidity event may attract greater lender interest, although each transaction is assessed individually.

If your holding is in a fund rather than direct equity, NAV financing may be a more appropriate structure depending on the circumstances.

Risks and important considerations

Borrowing against private equity carries risks that should be considered carefully before proceeding:

• Value can fall as well as rise. The value of shares used as collateral can decline. Consider how a fall in value is treated under the loan agreement and the potential effect on your wider financial position.
• Concentration risk. Borrowing against a single private holding can increase exposure to one asset.
• Illiquidity and valuation risk. Private shares can be difficult to value and sell, which can affect the amount a lender is willing to advance.
• Legal and structural restrictions. Pre-emption rights, transfer restrictions and shareholder agreements can limit or complicate a pledge.
• Cost. Interest, fees and any equity participation or other costs should be assessed as part of the overall borrowing arrangement.
• Collateral risk. If the borrower does not comply with the terms of the facility, the lender may have rights to enforce its security over the shares.

Independent legal and tax advice should be obtained where appropriate before entering into a facility.

Tax considerations

Loan proceeds are not usually treated as income simply because they are borrowed, but the tax treatment of a particular structure depends on the circumstances. Structures can involve companies, trusts or offshore elements, and tax treatment can vary between jurisdictions.

You should always obtain independent tax advice before proceeding. Enness does not provide tax advice.

Examples of share-backed lending

Enness has experience arranging finance against private company shareholdings in circumstances where conventional lenders may not be able to use the underlying equity as collateral.

Any transaction examples used in Enness marketing should be appropriately anonymised and approved for publication. Individual circumstances, lender appetite, terms and outcomes vary and previous transactions are not indicative of what another borrower may achieve.

Alternatives to consider

• Single stock loans for concentrated positions in listed companies.
• Lombard loans for eligible investment portfolios.
• NAV financing for private equity and venture fund interests.
• Broader private finance for entrepreneurs, investors and business owners.

Is there a market for this type of lending?

There is a specialist market for lending against non-traditional collateral, including private equity stakes, pre-IPO shares and other unlisted assets. Lender appetite varies considerably according to the company, sector, stage of development, shareholding and potential liquidity event.

For borrowers considering this type of finance, identifying a lender whose criteria align with the underlying asset is an important part of the process.

How Enness helps

Enness is a specialist high-value finance broker working with UHNW individuals and families, founders and international clients. We arrange bespoke facilities against complex and illiquid assets, working with private banks, credit funds and specialist lenders.

The appropriate lending structure will depend on the borrower's circumstances, the assets available as security, the proposed use of funds and individual lender criteria.

Speak to a Securities-Backed Lending Specialist

If you would like to explore whether finance against private company shares may be appropriate for your circumstances, speak to a Securities-Backed Lending Specialist.

FAQs

Can I borrow against shares in a company I co-founded?

Potentially. Founders may be able to raise capital against their equity, particularly where the company has established financials or a credible potential liquidity event. Availability depends on the company, shareholding and lender criteria.

Is this available to minority shareholders?

Potentially, although the size of the holding, the company's financial position, transfer restrictions and liquidity outlook will all be relevant. Lenders may place greater emphasis on shareholders with significant influence or control.

Do I need to transfer the shares to the lender?

Not necessarily. Depending on the structure, shares may be pledged or held in escrow or an SPV rather than transferred outright. The appropriate structure depends on the lender, company documentation and legal arrangements.

Are there tax implications?

The tax treatment depends on the structure and individual circumstances. Always take independent tax advice before proceeding. Enness does not provide tax advice.

How much can I borrow against private company shares?

The available LTV varies significantly according to the company, shareholding, valuation, liquidity outlook and lender. Indicative LTVs may range from around 15% to 40% in some circumstances, with higher levels potentially available for particularly strong companies and credible liquidity events. These figures are not guaranteed and should not be taken as an indication of terms available to an individual borrower.

How quickly can I access funds?

Timescales vary according to the complexity of the transaction, company documentation, valuation, due diligence and lender requirements. Some transactions may complete within several weeks, but no specific timeframe can be guaranteed.

Can I borrow against pre-IPO shares?

Potentially. Pre-IPO lending is more specialised and may be structured around the company's anticipated listing timeline. Any facility remains subject to lender appetite, due diligence and approval.