An investment-backed loan is a loan that is secured by financial assets. It is often referred to as a ‘Lombard loan’.  This name originates from Lombardy in Northern Italy, which is the birthplace of modern banking. Lombard loans are a longstanding solution, which provide an effective way for investors to manage their assets, while maintaining flexibility and control.


Investment backed lending can be a cost-efficient and flexible way to unlock liquidity from your investment portfolio.
 

How does it work?

Is Investment-Backed Lending right for me?

Determining the right course of action depends on your outlook for markets and tolerance for risk as well as your financial goals. Our specialist lending teams will evaluate the value of your assets alongside your liquidity needs and then tailor an appropriate financing structure.

How much could you borrow? Our experts calculate a loan to value (LTV) for each security in your investment portfolio. Adding them together gives the total loanable value of your portfolio.

The Benefits of Investment-Backed Lending

Maintain your investment strategy: Access cash liquidity without selling down and interrupting your existing investment strategy. If a private structure takes out the loan, there may be tax savings on interest payments (depending on the tax jurisdiction).

Enhance your returns: Leverage the performance of your portfolio by borrowing to gain even greater exposure to the most attractive investment opportunities.

Optimise your portfolio: Make your investment portfolio more efficient in terms of its risk and return profile in order to better match your financial objectives.

Manage a concentrated position: Borrow against a concentrated position to diversify your investment portfolio, which can help to reduce risk over the long term.

Lending against an asset which is continually changing in value carries certain risks. If the value of your investment portfolio falls below the value of your loan, then you may be asked to cover a margin call. Currency exchange fluctuations could also have a negative effect, if borrowing in a currency different to that in which the assets in your portfolio are denominated.

Lombard lending to provide an injection of funds and purchase student accommodation.

The scenario

A client required liquidity to invest into their company while it worked through the research and development stages of a new product. 

Corporate or private equity finance can be costly, intrusive and time consuming, so alternative solutions needed to be considered. 

At the same time, one of the client’s children was applying to university and would require accommodation in the near future. With offers from several universities under consideration, mortgage finance proved difficult as the location and property were unknown.

The solution

When there is uncertainty, alternative financing options are more valuable than ever. Traditional channels can be expensive in terms of interest costs, conveyance and valuations, and inevitably are longer in their process.

We analysed the client’s full balance sheet and quickly determined that we could provide quick and flexible credit facilities secured against their personal investment portfolio held with the bank. This would enable the client to purchase university accommodation for his daughter.

We were also able to provide an overdraft facility for the client’s business needs, offering flexibility during an uncertain cashflow cycle.

The time taken from the initial request to the facility becoming available was 14 days.