Advanced Securities-Based Lending: Securing Liquidity Without Selling 

July 18, 2025

High-net-worth individuals often face a common dilemma: needing liquidity for significant expenses or opportunities while wanting to hold onto appreciated assets. Selling investments¹ to raise cash can trigger taxes and disrupt long-term wealth strategies. Fortunately, advanced securities-based lending (SBL) offers a flexible solution — allowing investors to borrow against their portfolios without liquidating holdings. Explore how securities-based lending works, its advantages, risks, and how it fits into a comprehensive wealth management plan¹. 

What is Securities-Based Lending? 

Securities-based lending allows borrowers to use their investment¹ portfolios as collateral to secure a loan. Instead of selling stocks, bonds, or mutual funds to generate cash, you pledge those assets to the lender, who then provides a line of credit or loan amount based on a percentage of the portfolio’s value. This option preserves your investment position and avoids triggering capital gains taxes that come with sales. 

The loan amount is typically a portion of the portfolio’s market value, often ranging between 50% to 90%, depending on the asset types, market volatility, and lender policies. Rates are usually lower than unsecured loans because the loan is secured by valuable collateral. Borrowers can use the funds for various purposes, such as funding business ventures, real estate purchases, paying taxes, or covering unexpected expenses. 

Benefits of Securities-Based Lending 

1. Maintain Your Investment¹ Strategy 
One of the biggest advantages of SBL is that it allows you to keep your investment¹ portfolio intact. Selling appreciated assets may disrupt your long-term financial plan or cause you to miss out on market growth. By borrowing against your portfolio, you preserve your exposure to potential gains and dividends. 

2. Tax Efficiency 
Because you aren’t selling securities, you avoid realizing capital gains and the associated tax liability. This can be especially beneficial in years when you want to minimize taxable income or when capital gains tax rates are high. 

3. Speed and Flexibility 
Securities-based loans can often be arranged quickly compared to traditional loans or selling assets, which may take longer due to market conditions or transaction processes. The flexible credit line structure also lets you borrow only what you need, repay it, and borrow again as necessary. 

4. Competitive Interest Rates 
Since these loans are secured by high-quality collateral, interest rates tend to be lower than unsecured loans or credit cards. This cost-effectiveness makes it an appealing option for managing short-term liquidity needs. 

When is Securities-Based Lending Appropriate? 

Securities-based lending is particularly useful for high-net-worth individuals who: 

• Need short-term liquidity but want to avoid disrupting their investment¹ portfolios. 
• Face large one-time expenses, such as funding a business opportunity, making a down payment on real estate, or covering medical bills. 
• Seek to manage cash flow without triggering taxable events. 
• Wish to diversify their borrowing sources beyond traditional bank loans. 
• Require flexible access to funds with the ability to repay and re-borrow. 

Understanding the Risks 

While securities-based lending offers many benefits, it also comes with risks you should consider: 

1. Market Risk and Margin Calls 
Because the loan is secured by investments¹, a significant decline in the portfolio’s value can trigger a margin call. This means the lender may require you to deposit additional funds or sell some assets to maintain the required loan-to-value ratio. Failure to meet margin calls can lead to forced liquidation of assets, which could disrupt your investment strategy and potentially trigger taxes. 

2. Interest Rate Risk 
Many securities-based loans have variable interest rates, meaning your borrowing costs can increase if market rates rise. It’s important to understand your loan’s terms and be prepared for changes in interest expenses. 

3. Limited Use of Certain Assets 
Not all investments¹ qualify as acceptable collateral. Lenders typically prefer highly liquid, publicly traded securities and may exclude private equity, real estate holdings, or alternative investments¹. This limits how much you can borrow depending on your portfolio composition. 

4. Potential Impact on Estate Planning 
Borrowing against assets can affect your overall financial picture and estate plans¹. It’s important to coordinate with your advisors to ensure the strategy fits your long-term wealth transfer goals. 

How Securities-Based Lending Fits into Wealth Management 

Securities-based lending is not just a borrowing tool; it can be a strategic component of a broader wealth plan. When integrated thoughtfully, it offers financial flexibility without sacrificing investment growth or tax efficiency. 

1. Complement to Traditional Lending 
SBL can supplement other borrowing options like mortgages or business loans, providing an alternative liquidity source that preserves cash flow. 

2. Strategic Cash Flow Management 
By using portfolio-backed credit, you can manage liquidity needs for irregular expenses or investment opportunities without disrupting your core assets. 

3. Estate and Tax Planning 
Borrowed funds can be used to fund trusts, pay estate taxes, or finance legacy gifts, all while keeping your investment portfolio intact. 

4. Collaboration with Trusted Advisors 
Working with wealth managers, tax professionals, and lenders ensures securities-based lending fits your unique financial situation and goals. First Western Trust, for example, offers tailored guidance and sophisticated lending solutions that align with your overall strategy. 

Conclusion 

Advanced securities-based lending provides high-net-worth individuals with a powerful tool to access liquidity quickly and efficiently while preserving their long-term investment plans. By leveraging your portfolio as collateral, you can meet immediate financial needs or seize opportunities without the tax consequences or disruption of selling assets. However, understanding the risks—especially market fluctuations and margin calls—is essential before proceeding. 

Partnering with knowledgeable advisors and selecting lenders who specialize in complex lending strategies ensures that securities-based lending supports your broader wealth management objectives. When executed thoughtfully, it can be a flexible and tax-efficient way to unlock capital and enhance your financial agility. 

If you’re considering securities-based lending as part of your liquidity strategy, reach out to First Western Trust to explore how this sophisticated financing option can help you meet your financial goals while keeping your investments working for you. 

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Disclaimer: Private banking services offered through First Western Trust Bank, Member FDIC 

¹ Investment, wealth planning, and trust and estate products and services are Not FDIC Insured, Not guaranteed by the Bank, May Lose Value 

This content is for informational purposes only and does not constitute legal or tax advice. Please consult your legal or tax advisor for specific guidance tailored to your situation. First Western Trust Bank cannot provide tax advice. Please consult your tax advisor for guidance on how the information contained within may apply to your specific situation.