Lombard Loan

A Lombard Loan (also known as portfolio financing or securities-backed lending) allows you to borrow against your investment portfolio — typically made up of listed shares, bonds, or unit trusts — without having to liquidate them.

Unlike other secured loans that rely on property or cash deposits, Lombard lending uses your financial assets as collateral. The amount you can borrow depends on the loan-to-value (LTV) ratio determined by the lender based on your portfolio’s liquidity, volatility, and diversification.

If your investments fall in value, the lender may request that you top up the collateral or partially repay the loan — a process known as a margin call. For this reason, Lombard loans are usually offered to high-net-worth individuals (HNWIs) or private banking clients with diversified portfolios.

Key Features

• Collateral remains invested: You continue to earn dividends or capital gains while accessing liquidity.
• Flexible structure: Can be structured as a fixed-term loan or a revolving credit facility.
• Competitive rates: Generally lower than unsecured borrowing due to the quality and liquidity of the pledged assets.
• Risk: If market values drop, you may face a margin call or forced liquidation.

How It Differs From Other Loans

While both Lombard loans and secured overdrafts provide liquidity against pledged assets, the underlying collateral and risk dynamics differ:

• Secured overdrafts are often backed by fixed deposits, property, or other tangible assets, whereas Lombard loans use marketable securities.
• Secured overdrafts are commonly used for short-term cash flow management, while Lombard loans are typically used for wealth management and investment purposes, such as funding new opportunities without selling existing holdings.
• In overdrafts, collateral values tend to be stable; in Lombard loans, they can fluctuate daily, requiring active monitoring and discretionary assessment.

Lending Structure

Lombard loans fall under discretionary lending rather than program lending and are not something that can be easily compared apple to apple, as they involve negotiated T&Cs - to be arranged by intermediaries such as loan brokers. Each facility is individually assessed, taking into account the borrower’s overall financial position, portfolio quality, and relationship history with the bank. Even if the lender has internal LTV guidelines, final approval and terms are at the bank’s discretion.

Common Uses

• To seize an investment opportunity quickly without selling long-term holdings.
• To finance property purchases, business investments, or lifestyle assets without triggering capital gains.
• To bridge short-term liquidity needs for individuals with substantial portfolios.