Investment-backed lending.

Investment-backed lending is borrowing against a pledge of your investment portfolio — most often listed shares, funds, and bonds. You pledge the portfolio as collateral, draw a cash advance against a fraction of its market value, keep beneficial ownership and income subject to structuring, and recover the assets in full on repayment. It is the term several UK private banks use for the instrument that continental banks have long called a Lombard loan.

Investment-backed lending, Lombard lending, securities-backed lending

Investment-backed lending, Lombard lending and securities-backed lending are names for one discipline, each favoured in a different setting. Investment-backed lending is the phrase a number of UK private banks use with their clients. Lombard lending is the older private-banking term, standard in Switzerland and continental Europe. Securities-backed lending is the term of choice in institutional and US markets.

In every case the borrower pledges a portfolio of liquid investments, borrows against a fraction of its value, and keeps ownership. The name changes with the market; the structure does not. A revolving version, drawn and repaid within a limit, is usually called a Lombard credit line.

How investment-backed lending works

Investment-backed lending works the same way wherever the facility is arranged: the borrower pledges a defined portfolio of investments to a custodian under a security agreement, and the lender advances cash equal to a percentage of the portfolio’s market value, the loan-to-value. Interest accrues on the drawn amount for the term of the facility, and the pledged investments remain the borrower’s property throughout.

When the borrowing is repaid, the pledge is released and the borrower’s control over the portfolio is unencumbered once more. Because the assets are pledged rather than sold, the borrower keeps the economic exposure, the income, and the vote (subject to structuring), and does not trigger the disposal that a sale would represent; how that bears on capital gains tax when borrowing against shares is covered separately.

What can be pledged

For investment-backed lending arranged by Lombard Financing, eligible collateral is freely tradable shares listed on a recognised exchange and free of existing liens, held singly or as a diversified portfolio; the criteria are set out in who qualifies for a Lombard loan. Across the wider market, lenders may also accept government and investment-grade bonds and selected funds.

Quality and liquidity govern how much can be borrowed. A broad, liquid portfolio supports a higher advance than a single, thinly traded holding, because the lender can value and, if necessary, realise the collateral with far greater confidence.

Assets held inside a tax wrapper that prohibits their use as loan security — a stocks and shares ISA, for example — generally cannot be pledged; the note on borrowing against a stocks and shares ISA explains why.

How much you can borrow

The amount advanced through investment-backed lending is the loan-to-value, and it is set per portfolio rather than by a rate card. A diversified, liquid book supports a higher advance than a single concentrated holding, because the lender can value and realise it with greater confidence. Illustratively, advances run from around 20% for a concentrated small-cap position up to roughly 65% for a diversified, liquid portfolio.

The LTV drivers are liquidity and free float, volatility, position size, single-name concentration, and the recourse profile. A fuller treatment sits on how much you can borrow against shares, and the firm publishes an indicative LTV calculator for a transparent first estimate.

What it costs

Investment-backed lending is priced at a reference rate in the loan currency (such as SONIA, SOFR, EURIBOR, or SARON) plus a spread that reflects the loan-to-value, recourse, tenor, and the liquidity and volatility of the collateral. There is no published rate card, and the right basis for comparison is the whole structure, not the headline coupon. The interest rates and costs page sets out the components in full.

Who offers it, and who uses it

Investment-backed lending is a private-banking and specialist-credit service. Several UK private banks, among them Coutts and Arbuthnot Latham, describe their portfolio-backed facilities in these terms, and the wealth arms of the larger banks offer comparable lending; the landscape is set out in the note on which private banks offer Lombard loans.

Investment-backed lending is used by private clients and their family offices, company founders with concentrated holdings, controlling shareholders, and institutional holders: substantial holders who want liquidity without giving up a position. Lombard Financing is an independent Geneva arranger of these facilities, engaged by introduction and never at retail.

Investment-backed lending at a glance

In short, investment-backed lending advances cash against a pledged investment portfolio, leaves ownership with the borrower, and is sized by a loan-to-value set for each portfolio.