Advantages and Disadvantages of Securities Based Lending
In a world where market timing matters and liquidity opens doors, securities-based lending has become an increasingly valuable tool for high-net-worth individuals and investors. Whether you’re looking to unlock capital without disrupting your long-term investments or seeking funding for business, real estate, or personal ventures, securities-based lending offers a flexible and tax-efficient alternative to traditional loans.
Understanding Securities-Based Lending
Securities backed lending (SBL) allows borrowers to use their investment portfolio—typically publicly traded stocks, bonds, or mutual funds—as collateral to secure a loan. Rather than liquidating assets and potentially triggering capital gains taxes, you can retain ownership of your investments while accessing a credit facility based on their market value.
The concept is straightforward: a lender assesses the value, liquidity, and volatility of your portfolio, assigns a loan-to-value (LTV) ratio (commonly up to 65%), and provides you with a line of credit or lump-sum loan. This capital can be used for nearly any purpose—without the restrictions that often come with traditional personal or business loans.
How It Works
Here’s how a typical securities-based lending arrangement functions:
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Collateral Selection: You pledge eligible securities such as blue-chip stocks or liquid bonds.
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Loan Structuring: The lender evaluates the portfolio and assigns an LTV ratio based on risk.
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Loan Issuance: You receive a loan or revolving line of credit, often in GBP, USD, EUR, or RMB.
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Repayment Terms: Interest is serviced monthly or quarterly, and the principal is repaid according to the loan term (typically 36–60 months).
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Custody & Control: Custody often remains with a third party, and the loan is structured with or without title transfer depending on the lender.
At Platinum Global Bridging Finance, we structure margin loans with recourse, allowing clients to retain economic ownership of their shares while accessing liquidity.
Benefits of Securities-Based Lending
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No Asset Liquidation: Maintain your exposure to market growth and dividends while unlocking capital.
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Speed & Simplicity: Loans can be funded in 3–7 days with minimal documentation.
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Competitive Interest Rates: From 3% per annum, depending on the collateral quality and loan size.
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Flexible Use of Funds: Use the loan for real estate, business ventures, investment, debt consolidation, or personal needs.
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No Upfront Fees: Unlike traditional financing, there are no application or arrangement charges.
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Multi-Currency Support: Loans available in GBP, USD, EUR, or RMB to suit your financial strategy.
Who Is Securities-Based Lending For?
SBL is typically best suited for:
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High-net-worth individuals with portfolios valued from £250,000 and up
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Investors who want to avoid selling highly appreciated securities
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Business owners looking for working capital without traditional collateral
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Global investors seeking liquidity across different currencies
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Tax-conscious borrowers who want to defer capital gains
Whether you’re acquiring property, funding a business, or reinvesting, securities-based lending offers the flexibility to act without compromise.
Risks to Consider
While securities-based lending offers many advantages, borrowers should be aware of the associated risks:
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Market Risk: If the value of your pledged securities falls, you may need to post more collateral or face forced liquidation.
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Leverage Risk: Using borrowed funds to reinvest can magnify gains—but also magnify losses.
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Currency Risk: Borrowing in a different currency than your assets may expose you to FX fluctuations.
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Interest Rate Risk: While many loans are fixed, variable rate structures may increase your cost over time.
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Margin Calls: Falling asset values can trigger calls for additional collateral or partial loan repayment.
Always assess your risk tolerance and work with experienced advisors before using leverage.
Securities-Based Lending Criteria at Platinum Global Bridging Finance
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Minimum Loan Size: £250,000 (flexibility for liquid stocks)
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Eligible Collateral: Blue-chip and highly liquid AIM-listed stocks
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Loan-to-Value (LTV): Up to 65%
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Currencies: GBP, USD, EUR, RMB
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Loan Term: 36 months to 5 years
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Loan Type: Margin loan with recourse (non-title transfer)
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Interest Rates: From 3% p.a., serviced monthly or quarterly
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Custody: Remains with a third-party institution
Is Securities-Based Lending Right for You?
If you hold a sizeable investment portfolio and need access to capital without selling assets, securities-based lending could be the solution. It’s flexible, fast, and designed for sophisticated borrowers who value control and tax efficiency.
Speak to Our Experts Today
At Platinum Global Bridging Finance, we specialize in sourcing tailored securities-backed loan structures for clients across the UK, Europe, and the U.S. Our experienced team will work with you to evaluate your portfolio, determine your borrowing capacity, and structure a facility that aligns with your financial strategy.
📞 Contact us today to explore how you can unlock the value of your investment portfolio without disruption.
Securities based lending involves using your stock or share portfolio as collateral to release cash in a short time frame. Basically, you’re taking a loan against your existing investments, such as ETFs, mutual funds, or stocks.
Non-purpose loans, or securities based loans, are cost-effective and provide financial flexibility. Plus, you can use them for various purposes, from equipment purchase to office renovations or even private purchases such as house or property purchases. Most lenders will accept different types of collateral, including:
- Hedge funds
- Preferred stocks
- Mutual funds
- Single stock
- Equities
With this type of lending, business owners have access to extra capital without the need to sell securities. This allows them to pursue existing investment strategies and take advantage of new opportunities.
The Advantages of Securities-Based Loans
Compared to traditional loans, such credit requires less paperwork. Most times, you’re able to get the funds you need within days. How much money you’ll receive depends largely on the value of the securities used as collateral.
When you apply for securities based loans, it’s no need to liquidate assets or have perfect credit. This allows you to easily obtain the money and invest it in your business. Additionally, interest rates are often lower than other financing options.
In 2015, the global securities finance market had an inventory value of $13.22 trillion. This number has increased ever since. Business owners prefer this type of lending for its convenience and flexibility.
Depending on the lending institution, you can borrow anywhere from $500k to $5,000,000 and even more. This gives you access to funds for large purchases, such as real estate and heavy machinery. In general, the loan must be repaid within five years but can also be repaid over a shorter time period like 12 to 18 months.
Are There Any Drawbacks To Securities Based Loans?
Like everything else lending wise, securities based lending has its downsides. This type of credit isn’t suitable for all businesses and carries special risks.
Let’s say the value of the securities used as collateral drops below the minimum threshold set by the lender.
In this case, you may need to pledge additional securities or pay down your line of credit. Otherwise, the lender has the right to sell some or all of the securities that act as collateral.
Also, if you fail to pay on time, the lending institution can liquidate the securities used against the loan. This can hurt your business and have negative tax consequences. Furthermore, you may end up paying higher interest rates.
The best way to mitigate risks is to pay your loan before the due date. To stay safe, don’t borrow more than you need.
Securities Based Loans For Growing Your Business
Most business owners need financing sooner or later. Whether you’re looking to expand your services, purchase new equipment, or make investments, you may lack the funds required to meet your goals this can be achieved with a securities based loan.
In fact, nearly half of entrepreneurs say that a lack of capital is often the reason why small businesses fail.
A common practice to secure funding is to apply for securities backed loans.
These provide quick access to capital that can be used for business investments, real estate purchase, equipment rental, and more. Unless you’re planning to use the money to buy shares or make other securities-based transactions, this kind of loan is a viable option.
Compared to other forms of credit, securities-based lending involves lower rates. The funds are easier to obtain and can be used for almost any purpose. Most times, there are no set-up or cancellation fees.
But how exactly do securities based loans work? Are there any drawbacks?
Let’s find out!
Without a doubt, stock loans or securities based loans are a good choice for businesses that strive for success and growth. This type of lending gives you easy access to money and carries lower interest than other financing methods.
Assess your options, weigh the pros and cons, and make a decision accordingly. Before applying for a loan, determine how much money you need and how you’re going to use it.
For more information on stock loans, check out our other blog posts. We’ll show you how this crediting option works and what to expect.
If you’re ready to apply for securities based loans, contact us today! We offer low-interest rates and flexible terms so you can grow your business without having to worry about financing.
Platinum Global Bridging Finance is a distinguished high-net-worth finance broker. We specialize in providing tailored financial solutions, including Property Bridging Finance, Development Finance, Single Stock Loans, Margin Stock Loan, Crypto Finance, Crypto Loans and Commercial Property Finance tailored to meet the diverse needs of our clientele seeking robust financial lending solutions.
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