Lombard Loans

Lombard loans can be an effective way to access liquidity, but they should be considered within the context of both their advantages and associated risks.

Benefits

Liquidity without selling assets
Borrowers can release capital while retaining ownership of their investment portfolio, maintaining exposure to potential market growth.

Flexible access to capital
Lombard loans are typically structured as revolving credit facilities, allowing funds to be drawn and repaid as needed over an agreed period.

Competitive pricing
Because the loan is secured against liquid financial assets, interest rates are often lower than unsecured borrowing, particularly for diversified portfolios.

Risks

Market volatility
If the value of the underlying portfolio falls, the strength of the collateral may weaken, increasing risk.

Margin calls
Lenders may require additional collateral or partial repayment if asset values drop below agreed thresholds.

Liquidation risk
Failure to meet margin requirements can result in the forced sale of assets to cover the loan.

Concentration risk
Portfolios heavily weighted toward a single asset or sector may face stricter lending terms and higher volatility exposure.

Lombard loan interest rates are typically negotiated on a case-by-case basis, with pricing driven primarily by the quality and diversification of the underlying investment portfolio.

In most cases, rates are influenced by:

• the loan-to-value (LTV) ratio
• the type and liquidity of assets (e.g. equities, bonds, funds)
• the level of diversification within the portfolio
• the size of the facility and lender

For well-diversified portfolios with conservative LTVs, Lombard loans can offer relatively competitive pricing, often starting from around 4.5%-8%+ per annum, depending on market conditions and structure. More concentrated portfolios or higher LTVs typically result in higher rates to reflect increased risk.
While Lombard loan pricing varies, lower-risk structures with diversified assets and conservative leverage tend to achieve the most favourable rates.

Lombard loans work by using an investment portfolio as collateral to secure borrowing. A lender assesses the value, liquidity, and diversification of the assets, then offers a loan based on a loan-to-value (LTV) ratio, typically around 50% to 70%.

Step-by-step process:

1. Pledge your portfolio as collateral
   Assets such as equities, bonds, or funds are held in a custodial account with the lender.
2. Agree loan terms and LTV
   The lender determines how much you can borrow based on the portfolio’s value and risk profile.
3. Access a credit facility
   Funds are made available as a revolving credit line, which can be drawn and repaid over an agreed period.
4. Monitor portfolio value
   If asset values fall below a certain threshold, the lender may issue a margin call requiring additional collateral or partial repayment.
5. Repay or refinance
   Once the loan is repaid, the securities are released. Some borrowers refinance depending on market conditions or liquidity needs.

Key considerations

• Eligible assets: Typically listed equities, bonds, and investment funds, provided they are sufficiently liquid
• Loan duration: Often short- to medium-term, commonly ranging from a few months up to 24 months
• Risk management: Falling asset values can trigger margin calls or, in some cases, partial liquidation of the portfolio

Lombard loans provide flexible access to liquidity, but ongoing monitoring of the underlying portfolio is essential to manage volatility and avoid margin-related risks.

Lombard loans can typically be arranged relatively quickly compared to traditional lending, often within a few days to a few weeks, depending on the complexity of the portfolio and the lender involved.

Where assets are already held with the lender or custodian, the process is usually faster. More complex or cross-border structures may take longer due to additional due diligence and structuring requirements.

Lombard loans are commonly used to release liquidity for a range of purposes without selling investment assets. Typical uses include property purchases, funding investment opportunities, or providing short-term liquidity for business or personal needs.

Because the facility is flexible, funds can often be drawn and repaid as required, making Lombard loans particularly useful for time-sensitive transactions or bridging liquidity gaps.

Every lender has its own eligibility standards for Lombard loans. Some lenders are also more flexible than others. As a general rule, however, you will need to have an investment portfolio of at least £100,000 before a lender will consider you for this type of financing. Some institutions may require that your portfolio is more significant than this. Lenders will also have other criteria you - or your securities - will need to meet before you are eligible for a Lombard loan from their institution.

Enness works with clients - and lenders - from around the world, and many offer Lombard loans in a variety of different currencies for your convenience. Lenders are used to working with international borrowers who have several business interests, investments, and income streams, and as a result, Lombard loans are a truly international solution. Most lenders are open to working with borrowers of any nationality.

As a very general rule of thumb, most Lombard loans are offered at a rate of around 50% of the value of your securities. In some cases, you will be able to get a little more, but this will depend on your situation and securities and will very much be at the lender's discretion.

The type of securities you own, how much you want to borrow, and the terms of your loan may also influence the amount you can borrow.

In principle, you can use any financial asset as security for a Lombard loan. However, the more liquid and mainstream your financial assets are, the more finance options exist.

Enness can help you secure a Lombard loan against the following:

• Portfolios
• Stocks
• Bonds

Lombard loans are structured based on the value and composition of the underlying investment portfolio, with pricing and leverage tailored to the level of risk.

Loan-to-Value (LTV) ratios

Most Lombard loans are offered at 50% to 80% loan-to-value (LTV), depending on the type, liquidity, and diversification of the assets. More conservative portfolios typically support higher borrowing levels.

Interest rates

Interest rates are usually negotiated individually and reflect the risk profile of the portfolio and structure of the facility. In many cases, rates start from around 4.5%-8%+ per annum, with lower-risk portfolios benefiting from more competitive pricing.

Loan terms and structure

Lombard loans are typically arranged as flexible or revolving credit facilities, allowing borrowers to draw and repay funds as needed. Structures may include:

• interest-only arrangements
• short- to medium-term facilities
• open-ended or renewable terms

Lombard loan pricing and leverage are directly linked to the quality and diversification of the underlying portfolio, with more stable assets typically achieving stronger terms.

Lombard loans in the UK are typically offered through private banks, wealth managers, and specialist lenders, rather than high street banks. Most mainstream lenders do not provide securities-backed lending facilities, meaning access is often limited to clients with established investment portfolios or private banking relationships.

As a result, many Lombard loans are structured through international or offshore lenders, particularly where portfolios are held across multiple jurisdictions or currencies. This is common for high-net-worth borrowers seeking more flexible or bespoke lending arrangements.

Because of this, structuring is a key consideration. Factors such as loan-to-value, custody arrangements, jurisdiction, and portfolio composition all influence the terms available. For larger or more complex requirements, aligning the loan with broader investment and liquidity objectives is essential.
Lombard loans are less widely available through mainstream UK lenders, making access, structuring, and lender selection an important part of securing competitive terms.

Lombard loans and margin loans both allow you to borrow against investment assets, but they differ significantly in how they are structured, managed, and used.

Lombard loans

Lombard loans are typically offered by private banks or specialist lenders and are structured on a bespoke basis. Terms such as loan-to-value, pricing, and repayment are tailored to the borrower’s portfolio, with a greater emphasis on flexibility and long-term portfolio management.

Margin loans

Margin loans are usually provided by brokerage platforms and are more standardised in structure. They often come with fixed terms, stricter margin requirements, and less flexibility around repayment or structuring.

Key differences

• Lender type: Private banks vs brokerage platforms
• Flexibility: Bespoke structuring vs standardised terms
• Use case: Long-term liquidity and wealth structuring vs short-term trading or leverage
• Risk management: More tailored thresholds vs automated margin calls

While both options provide access to liquidity, Lombard loans are generally better suited to high-net-worth borrowers seeking tailored, flexible financing, whereas margin loans are more commonly used for shorter-term, trading-focused strategies.

Lombard loans are typically used when investors want to access liquidity without selling their investment portfolio. They are particularly effective in scenarios where timing, flexibility, and preserving long-term positions are important.

Property purchases

A Lombard loan can be used to fund a property acquisition, allowing borrowers to act quickly without liquidating investments. This is often useful where speed is critical or where selling assets would disrupt a long-term strategy.

Liquidity bridge

These facilities can provide short-term liquidity to bridge a funding gap, for example, between transactions or ahead of an expected inflow of capital. The revolving nature of Lombard loans makes them well-suited to this type of use.

Investment opportunities

Lombard loans can be used to capitalise on new investment opportunities without selling existing holdings. This allows investors to redeploy capital while maintaining exposure to their core portfolio.

Tax planning considerations

In some cases, borrowing against assets may be used as part of a broader strategy to avoid triggering a disposal. However, tax treatment varies by jurisdiction, so professional advice is essential.
Lombard loans are most effective where liquidity is needed quickly, but maintaining exposure to existing investments remains a priority.

For high-net-worth individuals, Lombard loans are less about access to credit and more about how capital is structured across a broader portfolio. They are typically used to enhance flexibility, preserve long-term investment positions, and optimise overall balance sheet efficiency.

Portfolio leverage

Lombard loans allow investors to borrow against existing holdings while maintaining exposure to market performance. This enables capital to be redeployed into other opportunities without disrupting a long-term investment strategy.

Liquidity management

Access to liquidity without selling assets is a key advantage. Lombard loans can be used to fund property purchases, investments, or short-term capital needs, allowing investors to act quickly while preserving their core portfolio.

Cross-asset structuring

In more complex scenarios, Lombard loans are often used alongside other forms of finance, such as property lending or other securities-backed facilities. This enables a multi-asset approach to borrowing, helping to optimise leverage, manage risk, and maintain flexibility across the portfolio.

Lombard loans can be a safe and effective way to access liquidity when structured appropriately, but they carry risks linked to the underlying investment portfolio.

Because the loan is secured against marketable securities, the main risk is market volatility. If the value of the portfolio falls, lenders may issue a margin call, requiring additional collateral or partial repayment. If this is not met, assets may be sold to reduce the loan.

When used with conservative loan-to-value ratios, diversified portfolios, and reputable lenders, Lombard loans can be a reliable financing tool. However, ongoing monitoring and risk management are essential to avoid adverse outcomes.