Is a Lombard loan the same as securities-based lending?

Securities-based lending (SBL), also called securities-backed lending, is credit advanced against a pledge of listed shares or a diversified securities portfolio. The borrower pledges the securities as collateral, draws a cash advance equal to a fraction of their market value (the loan-to-value, or LTV), retains ownership of the assets, and recovers them in full on repayment. It is the same instrument a private bank calls a Lombard loan, and "share-backed loan" is another name for it.

What securities-based lending is, and its other names

Securities-based lending describes any loan whose security is a portfolio of marketable securities rather than property, a business, or a personal guarantee. The lender takes a pledge over the securities; the borrower takes cash. Because the collateral is liquid and continuously priced, the lender can size and monitor the advance with precision, and the borrower can raise liquidity quickly without disturbing the underlying position.

The same instrument travels under several names. Private banks and the Continental European tradition call it a Lombard loan, and the practice Lombard lending, after the medieval Lombard merchants who lent against pledged goods. Anglo-American markets tend to say securities-based lending, securities-backed lending, or a share-backed loan, and UK private banks also speak of investment-backed lending. The label changes; the structure does not. Throughout this page, treat the terms as interchangeable.

How the mechanics work

Securities-based lending 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 borrower pays interest on the drawn amount for the term of the facility, and the pledged assets remain the borrower's property throughout. When the loan is repaid, the pledge is released and the borrower's control over the assets is once again unencumbered.

Because the securities are pledged rather than sold, the borrower keeps the economic exposure to the underlying, keeps the dividend and voting rights (subject to how the facility is structured), and does not trigger the disposal that a sale would represent. That is the defining feature of the instrument: liquidity now, position intact.

Loan-to-value: the size of the advance

The loan-to-value (LTV) sets the size of the advance and is the single most important figure in a securities-backed loan. It 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 drivers of the LTV are consistent: the liquidity and free float of the collateral, its volatility, the size of the position relative to the market, the degree of single-name concentration, and the recourse profile. Indicative ranges are issued only after a review of the specific holdings; 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.

Recourse: non-, limited-, and full-recourse

Securities-backed facilities are arranged across three recourse profiles, and the choice materially changes the terms. Under a non-recourse structure, the lender's only remedy on default is the pledged collateral; the borrower's other assets are ring-fenced, which is the most protective profile for the borrower and typically carries a lower LTV and a wider spread. A limited-recourse structure caps or conditions recourse beyond the collateral, balancing protection and pricing. Under a full-recourse structure, the borrower stands behind the loan in full, which supports a higher LTV and a tighter spread.

Custody and the security package

The pledged securities are held by a qualified custodian under arrangements designed to keep the lender's security clean and the borrower's ownership intact. The collateral is typically ring-fenced so that it is bankruptcy-remote from the lender, and the security agreement sets out how the assets are valued, when additional collateral may be called, and the circumstances in which the lender may realise the pledge. Good custody is not an afterthought — it is what makes the borrower's retained ownership meaningful.

Disclosure and regulatory considerations

Pledging shares can carry disclosure consequences. In many markets, holding or pledging a stake above a defined threshold triggers a notification obligation to the relevant regulator or exchange under major-shareholding and transparency rules. Whether a pledge is disclosable, and at what level, depends on the listing venue and the nature of the holding, so it is checked case by case for each transaction. Lombard Financing arranges facilities so that any applicable disclosure is identified early, and licensed activities are conducted through appropriately authorised entities in the relevant jurisdiction.

The US securities-based line of credit (SBLOC) vs a term Lombard facility

A US securities-based line of credit (SBLOC) is a revolving limit against an investment account, drawn and repaid at will, while a term Lombard facility is a fixed advance arranged for a set period, typically twelve to thirty-six months, on bespoke terms.

An SBLOC is a form of securities-based lending typically offered by brokerage firms, often through a bank affiliate, with interest charged on the balance drawn. As FINRA’s guidance on securities-backed lines of credit explains, it is usually a non-purpose loan, so the proceeds cannot be used to buy or trade securities, and it is a demand loan that the lender may call at any time.

Why a broker’s line may cap or refuse a concentrated, restricted or non-US position is set out in when your broker won’t lend against your shares.

Several US banks and brokers disclose the size of their securities-based loan books; the latest figures, copied from their filings, are collected in securities-based lending market size.

Non-purpose and demand terms separate an SBLOC from a margin loan, which finances the purchase of securities, and from a term Lombard facility, whose loan-to-value, recourse profile and custody are agreed at the outset in bespoke documentation for the life of the loan. Where a holder wants revolving access on Lombard terms, the equivalent is a Lombard credit line, secured by the same kind of pledge.

Securities-based lending at a glance

In short, securities-based lending advances cash against pledged listed securities, leaves ownership with the borrower, and is sized by a loan-to-value agreed for each facility.

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 from a confidential enquiry to funded capital in disciplined stages, and indicative terms typically follow within one or two business days. If you are weighing this against other options, the difference between a Lombard loan, a margin loan, and a stock loan is a useful next step, and the borrower’s side is set out step by step in how to borrow against stocks.