In situations where a borrower’s wealth is not held in cash, securities-based lending can provide a flexible way to access capital. Securities-based lending (SBL) allows borrowers to use eligible assets, such as equities, bonds, funds and other investment securities, as collateral for a loan.
Securities-based lending can be an exceptionally useful tool for high-net-worth individuals whose wealth is tied up in investment portfolios rather than readily available cash.
Rather than selling assets, borrowers may be able to raise capital against them, using the funds for a range of purposes. This can include purchasing property, contributing towards a deposit, financing home renovations or taking advantage of time-sensitive investment opportunities.
Eligible securities can include publicly traded equities, mutual funds, fixed-income investments and bonds. Generally, assets must be unrestricted, unencumbered and capable of being freely traded.
Some assets can be more difficult to leverage. Private shareholdings, for example, may require a specialist lender, while many lenders will not accept certificated shares. Each case is therefore assessed on its individual merits, with different lenders offering solutions based on the type, liquidity and value of the assets being pledged.
For example, Lombard finance is a form of securities-based lending commonly offered by private banks. These facilities typically focus on liquid, investment-grade assets, while specialist lenders may consider other forms of collateral, including concentrated single-stock positions and more illiquid securities.
Securities-based lending can provide a valuable source of liquidity for borrowers who are asset-rich but cash-poor. Depending on the lender, funding may be available against investment portfolios from around £1m, with larger facilities structured for clients with substantial asset holdings.
By unlocking capital held within an investment portfolio, borrowers can retain their existing assets while accessing funds for property, business or investment opportunities.
