Borrowing against a concentrated position.

Borrowing against a concentrated single-stock position means pledging one large shareholding as collateral for a Lombard loan and drawing cash against a fraction of its value, while keeping ownership of the shares. Because the collateral is a single name, the loan-to-value and structure are calibrated tightly to the stock’s liquidity, its volatility, and the size of the holding.

The concentrated holder’s problem

Founders, executives, controlling shareholders, recent listings, and inherited stakes have one thing in common: much of the wealth sits in a single name. Selling realises cash but ends the position — it triggers a tax event, may signal a loss of confidence to the market, and can dilute control the holder wishes to keep. Yet liquidity is often needed all the same, for tax, for diversification, or for a new opportunity. A Lombard loan resolves the tension: cash is raised now, and the position is kept. The holder retains the upside and, subject to the facility, the votes.

Why concentration lowers loan-to-value

A single holding carries idiosyncratic risk — the risk specific to one company — with none of the diversification that lets a portfolio absorb a shock to any one name. It also tends to be more volatile than a broad index and harder to sell in size. Because a lender must be able to value the collateral and, if it comes to it, realise it with confidence, all of this pushes the advance rate down. A concentrated position is therefore lent against more conservatively than a diversified book; the discipline that sets that rate is set out in the note on how loan-to-value is set.

Position size and market depth

Two holders of the same stock can be offered different terms, because size matters as much as identity. A stake that is small relative to the stock's average daily volume can be sold in a day; one that represents many days of volume cannot be exited quickly without depressing the price. The lender looks at days-to-liquidate, at the free float, and at any overhang the position itself creates. The larger the holding against normal turnover, the lower the loan-to-value and the more conservative the structure.

Staged drawdowns

A concentrated facility need not be drawn all at once. Drawing in tranches, as capital is actually required, keeps interest cost down and leaves headroom beneath the loan-to-value threshold. That headroom is valuable when the collateral is a single, potentially volatile name: it gives the position room to move before any cure is needed. Staged drawdowns turn the facility into a flexible line rather than a single lump, which suits a holder funding a programme over time.

Hedging interplay

A protective hedge can change the terms materially. A collar — buying a put and selling a call — or a put alone caps the downside of the shares over the life of the hedge. Because that narrows the range within which the collateral can fall, a hedge can support a higher loan-to-value and a tighter spread than the unhedged position would carry. The hedge and the pledge must be structured together, since the hedge affects both the risk on the collateral and the economics of the shares. Where a holder is willing to cap some upside in exchange for protection, the combination is often the most efficient structure.

Disclosure, lock-ups, and control

For insiders and substantial shareholders, pledging shares is not a purely private act. A pledge can itself be disclosable under local securities law, and lock-up or blackout restrictions may apply around results or transactions. A well-built structure respects these from the outset. Crucially, a pledge is not a sale: subject to the facility's terms, the holder keeps voting rights and any board position, and retains the upside if the stock appreciates. Keeping ownership and control while raising liquidity is the entire point of the exercise. Related reading sits on Lombard loans for family offices.

Using the liquidity to diversify

The most common reason a concentrated holder borrows rather than sells is to diversify without giving up the position. A single stock that has grown into the bulk of a balance sheet carries idiosyncratic risk — the fortunes of one company, one sector, one currency. Selling to diversify crystallises a gain and ends the holding; borrowing against the position releases capital that can be deployed into a broader portfolio, real assets, or a new venture while the original shares stay pledged and owned. The result is a more balanced balance sheet without a taxable disposal, and with the upside in the core position retained. The trade-off is the cost of the facility and the market risk on the pledged stock, which is why the diversification case is strongest for holders with conviction in the underlying and a clear use for the proceeds. Related reading sits on how the wealthy borrow against stock instead of selling and liquidity options compared.