Borrowing Against Investment Portfolio

Through our market knowledge, we can deliver enhanced, bespoke or exclusive terms based on your requirements

To see what we can do for you, call us on 0203 900 4322 to discuss your requirements or book a free consultation below.

Borrowing Against an Investment Portfolio – What is it?

Borrowing against an investment portfolio is the process of taking out a loan secured against assets like stocks and shares in your investment portfolio. This is commonly known as investment-backed lending or a lombard loan. 

When taking out a loan, in a lot of cases, you’ll need to secure it against any substantial assets you have. This can be property, equipment or shares in a business. If you have significant assets, you could also raise funds against your stocks and shares portfolio, vehicles or valuable artwork and jewellery.

You’ll usually need a large portfolio to do so, in some cases a minimum value of £200,000. It’s also recommended to have a buffer or other assets that can be sold in the case your portfolio drops in value. For these reasons, these loans are typically only available to High-Net-Worth Individuals earning a substantial income or who have notable assets.

This is a specialist product that’s usually only offered by private lenders that are smaller and harder to find. To ensure you’re getting the most suitable deal for your circumstances it’s advisable to work with an independent broker that has relationships with lenders across the market.

We work closely with private banks that can lend against a large stocks and shares investment portfolio, an offshore bond, or similar types of assets – the more liquid and secure, the better.

However, this type of finance can be challenging to arrange due to the risks on behalf of the lender. We can source Lombard loans over £1m, but other boxes may need to be ticked to ensure a smooth application.

At Clifton Private Finance, we have a team of financial advisers who can offer tailored guidance, get you access to market-leading rates and even bespoke finance products.

Alex Chambers

Senior Private Client Adviser

For some of our HNW clients, a private bank lender will offer the best solution not only for their immediate borrowing needs but for their longer-term wealth management. This should be a long-term relationship that lasts for many years, so it makes sense to get an introduction to the private bank that will suit you best.

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What is a High Net Worth Individual?

How Does Asset-Backed Lending Work?

Advantages of Investment-Backed Lending

Potential Risks - What to Consider

What are the Interest Rates on Asset-backed Loans?

How We Can Help

What is a High Net Worth Individual?

High Net Worth criteria can vary from lender to lender, but the main loan providers in the HNW mortgage market at the moment use the following thresholds:

At least one applicant must have one of the following:

• £300k+ annual income
• Or, £3m+ in assets
• Your annual income ideally needs to be net of tax if it’s salary, and if you’re intending to use the net profits of your company before you’ve taken salary and dividends then you may need a more.

Your £3m capital needs to be fairly liquid and the assets need to be able to realise their full value reasonably quickly without a drawn-out sale or bidding process.

For this purpose, a stock portfolio can be a suitable option, because they can be sold fairly quickly to make up any shortfall. 

How Does Asset-Backed Lending Work?

In the initial stages, the lender will evaluate your portfolio's liquidity and risk profile. Well-established publicly traded stocks and investment-grade bonds are more likely to be accepted because they are considered more stable. 

Once your portfolio has been assessed, the lender will assign it a value and, if successful, will offer you a maximum amount and any other specific terms based on the valuation results. The lender will also likely look at your outgoings and wider financial circumstances. 

The overall process can be quite quick, which is one of the primary advantages of this type of loan. However, many factors come into play, so it's certainly not without complexity. It's also recommended to get advice from a tax professional during this process. 

Advantages of Investment-Backed Lending

One of the main benefits of investment-backed lending is the ability to retain ownership of investments while accessing funds. Selling your assets to raise capital could incur Capital Gains Tax liabilities. Raising funds against your portfolio, on the other hand, allows you to retain ownership and benefit from any potential market gains.

Another advantage is the speed and flexibility of the facility. A standard secured loan such as a mortgage will typically involve lengthy approval processes and rigid terms. In contrast, investment-backed loans provide quicker access to capital with fewer restrictions on how the funds are used. Borrowers can utilise the capital for various purposes, including property purchases or business growth.

Additionally, investment-backed lending often comes with competitive interest rates compared to unsecured borrowing. Since the loan is secured against a tangible asset, lenders typically offer more favourable terms, which can make them a cost-effective borrowing solution for high-net-worth individuals.

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Potential Risks - What to Consider

Despite its numerous benefits, investment-backed lending has inherent risks that should not be overlooked. Market volatility is one of the primary concerns, as a sudden drop in your portfolio's value could mean that you'll be required to provide additional assets or deposit more funds to make up any shortfall (this is known as a margin call). If you are unable to do so, you'll be at risk of having your investments liquidated. 

If you're borrowing in a different currency than your primary holdings, this can also pose additional risks. A shift in exchange rates could lead to an increase in repayment obligations and will impact your portfolio.

Interest rates should also be considered. While rates for a secured loan like this are typically lower than unsecured loans, they can still fluctuate based on the market and your own circumstances.

What Are The Interest Rates on Asset-backed Loans?

When it comes to asset-backed loans, interest rates are typically structured as a margin above the lender’s base rate. For example, private banks and wealth management firms may offer rates starting around 1% to 3% above the base rate.

Typically, the stronger and more liquid your portfolio (e.g., a blue-chip stock portfolio versus an AIM-listed stock holding), the better the interest rate and terms you'll be offered on your loan. Stocks and shares that are seen as more stable are desirable to lenders. Less established or unstable stock options carry more risk, and therefore, a lender will be less likely to offer you favourable terms. 

Essentially, if the value of your assets are relatively stable, they serve as a better bargaining chip against which to borrow funds because the lender will have more confidence that you can repay the loan if anything were to go awry. 

Unlike a mortgage, where you'll go through a highly stringent eligibility process to ensure you can afford the loan, asset-backed finance may not be subject to the same scrutiny. It's important to weigh the options for this kind of finance product and how it fits in with your long-term financial goals. 

How We Can Help

At Clifton Private Finance, we regularly help High-Net-Worth Individuals evaluate their options in line with their financial goals. Whether you're expanding a business or buying property, we can match you with a suitable lender that best suits your needs.

We have relationships with high street, private and specialist lenders. Our team of specialists can work with you to offer guidance on the process of applying for finance, offering access to market-leading rates. 

Through our market knowledge, we can deliver enhanced, bespoke or exclusive terms based on your requirements.

To see what we can do for you, call us on 0203 900 4322 to discuss your requirements or book a free consultation below.

Book Consultation