Can You Really Borrow Against Private Company Shares - Yes - Here's How

For many ultra-high-net-worth (UHNW) individuals, wealth is often tied up in illiquid assets, including private company shares. While these holdings can be incredibly valuable, accessing liquidity without diluting equity can be challenging. One solution gaining popularity is to borrow against private company shares releasing significant capital while retaining ownership and future upside. However, unlisted stock loans remain a very specialist part of the market and not every lender has an appetite for offering this financing.

This article explores how these loans work, who qualifies, how lenders assess risk, and how you can structure a loan against private equity effectively.

What Is a Loan Against Private Company Shares?

A loan against private company shares, also known as securities-backed lending, allows shareholders in unlisted businesses to use their equity as collateral for a loan. This can be a strategic solution to raise capital without triggering a taxable event or giving up ownership in a growing company.

Unlike loans secured against listed shares (which are relatively straightforward due to public pricing and liquidity), private share lending is more specialised. Lenders must consider the lack of a public market, challenges in valuation, and legal or structural limitations on transferability.

Still, with the right broker and lender, it’s entirely possible to release seven or even eight-figure facilities in just a matter of weeks.

How Much Can You Borrow Against Private Equity?

The loan-to-value (LTV) of a private company share loan will depend on several factors, including:

• Shareholder percentage and control
• Financial performance of the company
• Any upcoming liquidity event (e.g., IPO or acquisition)
• Previous funding round valuations
• Restrictions on share transfer or pledging

Typically, you can borrow between 20% and 40% of the share value. However, for highly credible companies, especially those with strong financials or near-term exits, LTVs can exceed 65%, structured via bespoke lending agreements.

Rates will usually reflect the risk, with interest rates starting from 6–9% per annum, depending on borrower profile, location, and structure.

Case Study: Raising £8 Million Against a Pre-IPO Tech Stake

A UK-based tech founder approached Enness holding around £20 million in equity in a well-known, pre-IPO firm. Rather than liquidate shares, he sought a seven-figure financing facility to secure a luxury property in a prestigious south of France location. Time was critical, and traditional banks were unable to lend due to the illiquid nature of the collateral.

Enness arranged a tailored facility that allowed the client to borrow 40% of the share value. The lender accepted the shares as collateral without requiring a sale, structured around the company's IPO roadmap. Funds were released in under 30 days, and the client retained full ownership of his shares, positioned for growth and future monetisation.

Why Borrow Against Private Shares?

Borrowing against private equity shares can offer several strategic advantages:

• Preserve ownership in a fast-growing company
• Avoid a taxable event or capital gains
• Generate liquidity quickly, often within 10 working days
• Fund real estate purchases, tax bills, new ventures, or lifestyle requirements
• Structure bespoke repayment or refinance options post-IPO or exit

As our Securities-Backed Lending Associate, Charles Bailey, at Enness Global, explains:

"It’s a way of having your cake and eating it. You retain long-term ownership while generating short-term capital, without selling equity or waiting for an exit."

What Do Lenders Look For?

Lenders assessing loans against unlisted shares focus on three things: valuation, transferability, and liquidity outlook.

• Valuation: Based on recent funding rounds, third-party appraisals, or internal financials.
• Transferability: Can shares be pledged or moved into an SPV or escrow structure?
• Liquidity Outlook: Is there a likely exit event or ongoing interest from investors?

Due diligence is critical. Legal checks will include company articles, shareholder agreements, and any pre-emption or transfer restrictions that might impact collateralisation.

While the benefits of such transactions are attractive, there are of course risks that all clients will need to weigh up when considering transactions of this nature.

As with all investments, the value can go down as well as up and this includes the value of any shares being used as collateral.

During discussions with lenders, clients should be aware of, and carefully consider the affects any decreases or losses will have, not only on the value of said shares, but also how any losses are dealt with in their contract with the lender and how that may affect their ownership of the shares, as well as the effects on their individual long-term financial goals and wealth.

Real-World Example: £5 Million Loan for a Healthcare Founder

In another case, Enness helped the founder of a private UK healthcare business borrow £5 million using their shareholding as collateral. With no external funding rounds and limited liquidity, the case required bespoke structuring and risk mitigation.

The lender agreed to a 45% LTV with interest-only repayments for less than 24 months. The funds enabled the founder to invest in a separate opportunity without diluting ownership of their primary business.

Is There a Market for This Type of Lending?

Absolutely. According to Preqin, private debt markets have grown to more than $1.7 trillion globally, with increasing allocations from funds, family offices, and private banks. Many of these lenders are now targeting non-bankable collateral, including private equity stakes, pre-IPO stock, and unlisted shares.

In fact, it’s estimated that over $35 billion in loans are now secured annually against private equity holdings worldwide. The appetite for this kind of lending is only growing, particularly among UHNW individuals, founders, and tech entrepreneurs.

FAQs

Can I borrow against shares in a company I co-founded?
Yes. Founders often use their equity to raise capital, particularly when the business is nearing a funding round, acquisition, or IPO.

Is this available to minority shareholders?
Potentially, yes. However, it will depend on the size of the shareholding and the liquidity outlook of the company. Lenders favour shareholders with decision-making control or influence.

Do I need to transfer the shares to the lender?
Not always. In some structures, shares are held in escrow or pledged rather than transferred outright. This depends on legal and company documentation.

Are there tax implications?
Loan proceeds are not usually taxed as income. However, always consult a tax adviser to ensure your structure is compliant with local regulations.

How quickly can I access funds?
Facilities can often be structured in 10–15 working days, depending on complexity, documentation, and valuation.

Final Thoughts: A Smart Alternative for UHNW Borrowers

Borrowing against private company shares isn’t just possible, it’s smart, strategic, and increasingly common among UHNW borrowers. Whether you’re a founder preparing for IPO, a shareholder in a thriving family business, or an investor in pre-IPO tech, this strategy offers a way to access liquidity without compromise.

At Enness Global, we specialise in unlocking high-value finance for clients with complex assets, offering speed, discretion, and a truly bespoke approach. If you’d like to explore your options, contact us today.