Running a business means spotting opportunities – and often these opportunities need quick access to capital.
But what if you’ve built up a strong investment portfolio and don’t want to sell your assets to fund your next business move? That’s where Lombard loans come in, offering a way to unlock capital while keeping your investment strategy on track.
These loans let you borrow against your existing investment portfolio, whether that’s stocks, bonds, or managed funds.
Unlike standard business loans that can take weeks or months to arrange, Lombard loans can be set up in a matter of days. You’ll keep ownership of your investments, potentially benefit from any market gains, and have the flexibility to use the funds as you see fit.
Let’s explore how these loans work, who they’re right for, and what you’ll need to consider before choosing this funding option.
What Are Lombard Loans?
At their heart, Lombard loans offer a straightforward way to borrow money using your investment portfolio as security.
Instead of selling your investments to free up cash, you can use them as collateral while keeping them invested in the market.
Think of it like borrowing against the value of your house – but in this case, you’re using your liquid assets.
These might include stocks listed on major exchanges, government and corporate bonds, gold or investment funds. The key difference is that these assets can be quickly converted to cash if needed, which is why lenders view them favourably.
For example, let’s say you own a UK-based manufacturing company and also hold a £750,000 investment portfolio.
You’ve spotted an opportunity to buy discounted equipment worth £300,000. You don’t have the cash and you don’t want to disrupt your investment strategy. A Lombard loan would let you borrow against your portfolio value, giving you quick access to funds while your investments continue working for you.
Private banks and specialist lenders offer these loans, with minimum portfolios starting from around £200,000. The amount you can borrow will depend on your portfolio’s composition – generally, more stable investments like government bonds might allow for higher borrowing levels than more volatile stocks.
Read more: Lombard Loans: Portfolio-Backed Lending
How Lombard Loans Work for UK Businesses
For business owners, understanding the mechanics of Lombard loans helps you assess if they’re right for your needs.
Let’s look at the loan structure and what you’ll need to put forward as security – these two elements shape how your borrowing works in practice.
Loan Structure and Terms
When you take out a Lombard loan, you’ll be able to borrow a percentage of your portfolio’s value.
Most lenders will offer up to 50-60% of your investment value, depending on the types of assets you hold. More stable investments often allow for higher borrowing levels.
The repayment structure can be tailored to suit your business needs.
You might choose to pay interest monthly, or have it rolled up and paid at the end of your loan term. Some business owners opt for a mix of both. Loan terms usually range from one week up to 24 months, giving you flexibility to match your borrowing to your business timeline.
You won’t make any monthly repayments of capital, everything is settled when the loan ends.
Security and Collateral Requirements
The assets you can use as security need to be easily valued and sold.
This usually means:
- Shares listed on major stock exchanges
- Government and corporate bonds
- Investment funds
- Cash deposits
Your portfolio will be valued regularly – often daily – to ensure there’s always enough security value for the loan.
If market movements reduce your portfolio value significantly, you might need to add more assets or reduce your borrowing. That’s why it’s worth considering keeping some additional assets and/or cash available as a buffer.
For business owners, one advantage is that you can often continue managing your investment strategy while the loan is in place. However, some restrictions might apply to protect the lender’s security. For instance, if you’re planning major changes to your investment mix, you’ll need to discuss these with your lender first.
A broker can help structure your loan to match your business needs while keeping risk manageable. They’ll look at factors like your portfolio diversity, market conditions, and your business plans to recommend the right approach.
Let’s talk bridging loans!
Who Benefits from Lombard Lending?
Business owners who already hold significant investment portfolios often find Lombard loans match their needs well.
If you’ve built up investments alongside running your company, this type of lending lets you access capital quickly, without unpicking your wealth management strategy.
You’ll likely find this option valuable if you run an established business and need quick access to funds
For instance, company directors with substantial personal investment portfolios might use these loans to seize time-sensitive opportunities. This could include buying stock at competitive prices or funding seasonal inventory without disrupting long-term investments.
Or even paying an unexpected tax bill.
Example
A UK manufacturing company director held a £1.2 million investment portfolio alongside running his business.
When a competitor went into administration, he spotted an opportunity to buy their equipment at 40% below market value – but needed £400,000 within two weeks. Rather than selling investments and triggering tax implications, he used a Lombard loan against his portfolio. This meant keeping his investment strategy intact while quickly securing the equipment that helped grow his market share.
These loans particularly suit business owners who:
- Hold liquid investments worth £200,000 or more
- Need fast access to capital
- Want to avoid selling assets in the current market
- Run established companies with clear growth plans
- Understand both business and investment markets
Common Uses
Let’s explore how UK business owners put Lombard loans to work.
Business Growth Opportunities
Many companies use Lombard loans to grab chances to expand. You might spot bargain-priced equipment that would boost production, or see a chance to buy stock at reduced prices. The speed of these loans means you won’t miss out while waiting for traditional finance.
For example, if suppliers offer early payment discounts, you could use a Lombard loan to take advantage of these savings. One UK food distributor saved £30,000 on their annual stock purchases by paying suppliers early – the loan cost less than the discounts earned.
Market expansion also suits this type of lending. Whether you’re opening new locations or moving into different regions, you can access funds without selling the investments you’ve built up over years.
Working Capital Management
Managing cash flow presents different challenges throughout the year.
Take a UK retail business we worked with – they needed to order Christmas stock in August when their cash reserves were lowest. With £250,000 in their investment portfolio, they used a Lombard loan to fund stock purchases, repaying it once seasonal sales peaked in December.
Project funding works similarly. If you’ve won a large contract but need upfront capital for materials or staff, these loans bridge the gap until your client pays. This helps you take on bigger projects without turning down opportunities due to short-term cash constraints.
Some business owners also use these loans to smooth out irregular income patterns. Rather than keeping large cash reserves idle in your business account, you can invest for better returns and borrow against these investments when needed.
Comparing Lombard Loans to Other Business Finance
Before choosing a Lombard loan, it’s worth looking at how they stack up against other business funding options.
Each type of finance suits different situations, and understanding the differences helps you make the right choice.
Business loans
Business loans from high street banks offer familiar territory for many company owners. However, they often need affordability checks, business plans, and trading history. The approval process can stretch over many weeks – not ideal when you need quick access to funds. Lombard loans, by contrast, focus mainly on your investment portfolio value, meaning faster decisions and less paperwork.
Asset finance
Asset finance works well for buying specific equipment but ties you to particular purchases. With a Lombard loan, you’ll have more freedom in how you use the money. You might start out planning to buy equipment but then spot a better opportunity – you’re free to change course.
Invoice finance
Invoice finance helps with cash flow by releasing money from unpaid invoices. While it’s useful for day-to-day trading, it depends on your sales levels and customer base. Lombard loans give you access to capital regardless of your current trading position, as long as your investment portfolio holds its value.
Unsecured lending
Unsecured lending often comes with higher interest rates due to the increased risk for lenders. Because Lombard loans use your investments as security, you’ll usually find the costs more competitive. Plus, you keep your investments working for you rather than selling them to raise capital.
Bridging loans
Commercial bridging loans provide another flexible funding option, often used for property purchases or to cover short-term cash needs.
While they can be arranged very quickly, like Lombard loans, they require property as security. This means you’ll need to own property with enough equity, and the arrangement costs might be higher due to property valuations and legal work. Lombard loans, on the other hand, use your liquid investments as security, which can be valued more quickly and easily.
What about Bitcoin investments?
How a Broker Adds Value
Working with a finance broker can make a big difference when you need quick access to business capital.
This goes beyond just finding a lender – it’s about structuring your borrowing in a way that best serves your business needs.
Experienced brokers have connections with a wide range of lenders, including private banks and specialist finance providers you might not find elsewhere. Each lender has their own preferences about portfolio types and loan structures, and your broker will know which ones best match your situation.
A broker can advise on how different investment mixes affect your borrowing power. They might suggest small adjustments that could improve your loan terms while keeping your investment strategy on track.
When it comes to negotiating terms, brokers know what’s possible in the current market. They’ll understand which elements of the loan offer might have room for movement, whether that’s the amount you can borrow against your portfolio or the flexibility of the repayment terms.
They’ll also handle the paperwork and liaison between parties, saving you time. From portfolio valuations to legal requirements, they’ll keep everything moving and help avoid common pitfalls that could slow things down.
Key Considerations Before Applying
Before moving forward with an investment backed loan, take time to review your position.
You’ll want to look at your investment portfolio stability – market swings can affect how much you can borrow, so consider keeping some extra assets/cash available as a buffer.
Think about your exit plan. Will you repay from business profits, or do you plan to refinance using a commercial mortgage? Having a clear repayment strategy helps you choose the right loan term and structure. Remember that selling investments could trigger tax implications, so factor this into your planning.
Consider all costs beyond just the interest rate. This includes any valuation fees or charges for portfolio monitoring. Your broker can provide a full breakdown so you won’t face unexpected expenses.
Next Steps
Lombard loans offer a practical way to access capital while keeping your investment strategy intact. If you’re considering this option for your business, start by gathering details about your investment portfolio – recent valuations and statements will help speed up the process.
Speaking with a broker early on makes real sense.
They’ll assess your portfolio, understand your business needs, and explain your options clearly. They can then approach suitable lenders on your behalf, saving you time and helping you secure the best terms for your situation.
Get in touch to discuss how we can help structure a Lombard loan that works for your business needs.
FAQ
With the right documentation, Lombard loans can be arranged within 7-10 days. If your portfolio is easily valued and straightforward, it might be even quicker.
Our lenders look for portfolios worth at least £200,000, though some might require higher values depending on how much you want to borrow.
The minimum loan size is £100,000.
Yes, but with some restrictions. You can usually continue your investment strategy, but significant changes might need lender approval to maintain loan security.
If your portfolio value drops significantly, you might need to add more assets as security or reduce your borrowing. This is why it’s wise to keep some additional assets as a buffer.
Yes, when used for personal purposes. However, business Lombard loans are unregulated.
Our lenders can accept investments listed on major international exchanges, but they might apply different loan-to-value ratios for overseas assets.
Most lenders accept:
- Shares listed on major exchanges
- Government bonds
- Corporate bonds
- Investment funds
- Gold bullion
- Cash deposits
Typically 50-60% of your portfolio value, depending on the types of investments you hold and their stability.
Strictly speaking, Lombard loans are geared towards stocks, bonds, gold and investment funds.
However, you can use a crypto-backed loan to borrow against your Bitcoin and Altcoin holdings.
Read more: Can I Borrow Against My Cryptocurrency?
