The Lombard loan.

A Lombard loan is a loan secured by a pledge of liquid assets — most commonly listed shares or a diversified securities portfolio. The borrower pledges the portfolio as collateral, draws a cash advance against a fraction of its market value (the loan-to-value, or LTV), retains beneficial ownership and the right to dividends subject to structuring, and recovers the portfolio in full on repayment. "Lombard loan" is the private-banking name for the instrument known elsewhere as securities-backed lending or a share-backed loan.

How a Lombard loan works

A Lombard loan works the same way in every market: the borrower pledges a defined pool of securities to a custodian under a security agreement, and the lender advances cash equal to a percentage of the pool's market value, the loan-to-value. The borrower pays interest on the drawn amount for the term of the facility.

Throughout, the pledged assets remain the borrower's property; the pledge simply gives the lender security over them. When the loan is repaid, the pledge is released and the borrower's control over the assets is unencumbered once more. The legal mechanics (how the pledge is created, when it can be enforced, and how it is released) are set out in how a Lombard loan is secured.

Because the assets are not sold, three things follow. The borrower keeps the economic exposure to the underlying. The borrower keeps the dividend and voting rights, subject to how the facility is structured; the note on dividends and corporate actions in a Lombard loan covers the detail. And the disposal that a sale would represent, with its tax consequences, does not occur while the position is held.

What can be pledged

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

Quality and liquidity then govern how much can be borrowed against what is pledged. Investments held inside a stocks and shares ISA are generally unsuitable, as the note on borrowing against a stocks and shares ISA explains.

Loan-to-value: how much you can borrow

How much you can borrow is set by the loan-to-value (LTV), the single most important number in a Lombard loan, and LTV is set per portfolio, not per asset class. A diversified, liquid book of large-capitalisation shares supports a higher advance than a single concentrated small-cap holding, because the lender can value and, if necessary, realise the collateral with far greater confidence. The variables that drive LTV are consistent:

• Liquidity and free float — how readily the collateral can be valued and sold without moving the price.
• Volatility — how far the collateral's value can move over the life of the facility.
• Position size relative to the market — a holding that is large against a stock's daily volume is harder to exit than one that is small.
• Single-name concentration — a diversified portfolio spreads risk that a single position concentrates.
• Recourse profile — whether the lender's remedy is limited to the collateral or extends to the borrower.

Indicative ranges are issued only after a review of the specific holdings. For an illustrative, transparent estimate of where a position might sit, the firm publishes an indicative LTV calculator. A fuller treatment sits on how much you can borrow against shares, and a worked example of how a Lombard loan is sized and structured follows a facility from the portfolio review to funding.

Recourse profiles

Institutional Lombard loans are arranged across three recourse profiles, and the choice materially changes the terms:

• Non-recourse — the lender's only remedy on default is the pledged collateral; the borrower's other assets are ring-fenced. This is the most protective profile for the borrower and typically carries a lower LTV and a wider spread.
• Limited-recourse — recourse beyond the collateral is capped or conditional, balancing protection and pricing.
• Full-recourse — the borrower stands behind the loan in full, which supports a higher LTV and a tighter spread.

When a non-recourse structure is the right choice is set out in non-recourse Lombard loans, and the wider picture in the risks of Lombard lending.

Tenor, costs, and custody

Lombard facilities are typically arranged for a term of twelve to thirty-six months, often with the option to renew. Pricing is expressed as a reference rate in the loan currency — such as SOFR, SONIA, or EURIBOR — 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 for Lombard loans; the right basis for comparison is the whole structure, not the headline coupon. A dedicated treatment sits on Lombard loan interest rates and costs. Throughout the facility, the pledged assets are held by a qualified custodian under bankruptcy-remote arrangements, so that the security is clean and the borrower's ownership is preserved.

Lombard loan at a glance

In short, a Lombard loan advances cash against pledged securities, leaves ownership with the borrower, and is priced at a reference rate plus a spread, typically for twelve to thirty-six months.

What a Lombard loan is used for

A Lombard loan is a liquidity tool, not a leverage strategy. It is used by founders and executives with concentrated stakes, by controlling shareholders, by family offices, and by private clients who want to borrow against shares without selling. Typical purposes include funding an investment or acquisition, bridging a liquidity event, diversifying around a concentrated holding, meeting a tax liability or a capital call, or simply managing timing.

Used well, a Lombard loan turns an illiquid but valuable portfolio into working capital while leaving the portfolio intact. Discipline is what makes it work: the right loan-to-value, the right recourse, and clean custody.

How it compares to other routes

A Lombard loan is one of several ways to raise liquidity from a portfolio, and it is not always the right one. A sale realises capital but ends the position and triggers a disposal. A margin loan lends against securities too, but as a standardised, open-ended, full-recourse brokerage facility. A collar or hedge manages downside without releasing much cash. The liquidity options compared page sets the four routes side by side; the short version is that a Lombard loan fits a holder who wants cash and wants to keep the position.

Other names for a Lombard loan

A Lombard loan is also called securities-backed lending, a share-backed loan or, in UK private banking, investment-backed lending; all describe the same instrument. "Lombard loan" is the private-banking term most common in Switzerland and continental Europe, while securities-backed lending, often abbreviated to SBL, is the term favoured in institutional and US markets.

The practice as a whole is called Lombard lending, and its revolving form, a limit drawn and repaid as needed, is a Lombard credit line. The name goes back to the Lombard merchant-bankers of medieval northern Italy, who lent against pledged goods; the note on why it is called Lombard lending tells the history. A Lombard loan is also distinct from securities lending, the quite different business of lending shares out to another party.

Who arranges the facility

Lombard Financing is a Geneva Lombard-credit house. We act as an introducer and arranger of private, portfolio-backed financing — engaged by introduction or direct enquiry, with senior principals involved throughout and no retail business. The process runs in five disciplined stages from a confidential enquiry to funded capital, and indicative terms typically follow within one or two business days. The borrower's side of the same journey is set out step by step in how to borrow against stocks.