Securities Based Lending

Securities based lending is a fast and flexible way for individuals to raise capital to react to an opportunity or solve a problem.

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Securities Based Lending

Securities based lending is a fast and flexible way for individuals to raise capital to react to an opportunity or solve a problem.

Get In Touch

The Benefits Of Securities Based Lending

Securities-backed lending (also known as Lombard Loans) is a cost-effective way for high-net-worth individuals to create liquidity quickly. Enness helps these individuals to raise capital without having to sell their securities.

Securities-backed loans offer a variety of benefits, which include:

  • The ability to create liquidity based on the market value of a security
  • A fast application process with limited underwriting
  • Numerous lenders to choose from
  • Being a cost-efficient alternative to selling shares
  • Several tax advantages

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Enness’ Role In Securities Based Lending

Plain vanilla Lombard loans can be relatively straightforward. However, it’s increasingly common for more unusual situations to arise, especially as individuals understand more about how they can use different securities as collateral for a loan. For example, individuals may want to use a single stock as collateral for a loan or wish to use a variety of more unusual or less liquid securities. With access to a global network of lenders, Enness connects borrowers with lenders who can offer securities backed loans. Whatever the borrower’s requirements and whatever their securities, Enness can help secure the best financing solution and outcome for clients.

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How Does Enness Help Clients Secure Lombard Loans?

Enness helps clients in a variety of ways, which includes:

  • Providing access to a large number of lenders to choose from
  • Always acting in clients’ best interests and negotiating the best outcome on their behalf
  • Analysing all assets to find clients’ the best lending solution
  • Being closely connected to key decision-makers in the industry
  • Having international coverage
  • A proven track record with both straightforward securities-backed financing and complex or unusual assets
How Does Enness Help Clients Secure Lombard Loans?

Which Assets Can Be Used For Securities Based Loans?

  • Financial portfolios
  • Single stock positions
  • Bonds, options

Stock Loan Features

Using securities-backed financing, accredited investors can benefit from fixed interest, securities-collateralised loans. To be eligible for a Lombard loan, a borrower must generally meet the following conditions:

  • Borrowers must be seeking a minimum loan of USD 1,000,000. There is no maximum loan amount.
  • Stocks qualify for collateralised financing if they have a minimum 30-day average trading volume of USD 300,000 or more. Securities are evaluated on a case-by-case basis.
  • The loan's principal balance cannot exceed 75% of the collateral value at loan closing.
  • Interest is paid monthly or quarterly. Annual rates sit between 3% and 6.5%.
  • Securities-backed loan terms can be between one and any number of fixed years. They can be extended on an annual basis at the lender’s sole discretion.
  • Dividends and other share-related benefits are disbursed at loan term.

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How can Enness help?
Stock Loan Features

Single Stock Loans

Single stock loans are a very niche part of the securities-backed finance market. Not all lenders offer this type of loans, and those that do tread carefully, given the risk exposure that comes with lending against a very concentrated portfolio.

Single stock loans are increasingly sought after, however. As a result, specialist lenders are increasingly willing to offer this type of loan to high-net-worth individuals and families. Single stock loans are commonly used to raise capital, purchase significant assets, spread risk away from a single stock portfolio, or seek broader investment opportunities.

Learn more about single stock loans

Unlisted Stock Loans

Unlisted stock loans are often used by high-net-worth individuals and entrepreneurs who have a significant amount of capital tied up in the shares of a private business. Borrowers commonly use this type of financing to boost liquidity to purchase a property or another big-ticket item, to seek new opportunities in the stock market or to reinvest in their business.

Many mainstream lenders don’t offer loans collateralised against unlisted stocks, however smaller players are often more flexible and offer competitive deals on this type of finance. 

Find out more about unlisted stock loans

Pre-IPO Loans

As more and more companies offer significant equity to employees in a bid to entice top talent to join the business early, pre-IPO loans are an increasingly in-demand financing product. Potential borrowers often need liquidity well before the company goes public and with firms staying private for longer, individuals with this type of equity often need access to capital well before an IPO.

Pre-IPO loans can be used for several reasons. Individuals may be looking to buy a property, make a significant purchase, invest in the stock market, or simply buy more shares in the company they own equity in.

Read more about pre-IPO loans

Securities Based Lending Underwriting Process

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Lombard Loan approval

Applicants identify the trading symbol and number of securities they will use as collateral. Applicants provide their ID, banking and brokerage information so the lender can satisfy KYC, AML and regulatory obligations. The lender evaluates the securities to ensure they meet internal trading and liquidity standards. They will also check the stocks are in proper custodial format.

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Receiving funds

If the loan is approved, the borrower electronically transfers the securities into the lender’s designated custodian account. The lender will verify receipt of the securities and then fund the transaction per the terms of the agreement.

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Repayment and repossession

For securities collateralised loans and repo transactions, the borrower can recover possession of the securities at the loan or transaction maturity date. They either repay the principal balance of the loan, or repurchase the securities at an agreed-upon discounted rate.