A Smarter Faster Way to Access Cash
[SBLOC] A Securities-Backed Line of Credit
A securities-backed line of credit uses your non-retirement assets as collateral for access to capital. You can borrow against the value of your portfolio without disrupting the skilfully curated investment strategy. It helps keep your portfolio intact, and in the market, while avoiding capital gains taxes or an untimely sale when you need access to cash.¹
What Can I Do with my SBLOC proceeds?
They can fund anything except buying additional securities or paying back an existing margin loan, outside of that the possibilities are nearly endless.
Family
- College expenses
- Weddings
- Gifts
- Family emergencies
Personal
- Medical expenses
- Personal goals
- Distributions (during a down market)
- Charitable contributions
Real Estate
- Home renovation
- Real estate purchase
- Bridge loan
Lifestyle
- Car/boat/RV
- Vacations
- Luxury items
- Cash
Financial
- Tax payment
- Debt consolidation
- IRA conversions
Other
- General liquidity needs
Meet Bill and Amy
Bill and Amy are building a vacation house for $1 million. They have $4 million in their non-retirement brokerage account, and they’re trying to decide whether it makes sense to liquidate a portion of their portfolio to fund the construction.
They expect to need the funds until construction is finished in a year, at which point it will be easier for them to obtain a regular mortgage.
After comparing the cost of liquidating assets and the net taxes due the cost of liquidation is greater than the cost of borrowing. The loan could then be paid off timelier down the road from the gains taken objectively making the cost of savings potentially that much greater.
Cost Comparison: Liquidating vs. SBLOC Financing
| Item | Liquidating Assets | Using SBLOC |
|---|---|---|
| Liquidity need | $1,000,000 | $1,000,000 |
| Interest expense | $0 | $65,700 |
| Capital gains | $652,508 | $0 |
| Capital gains tax | $122,671 | $0 |
| Return opportunity cost | $95,400 | $0 |
| Funding efficiency | 78.2% | 93.4% |
| Total savings using SBLOC | Â | $152,371 |
For illustrative purposes only. The cost of liquidation includes any tax liability resulting from the liquidation plus the opportunity cost of lost potential market returns. The cost of borrowing includes SBL loan interest.
Benefits of an SBLOC
Fast Access to Cash
Access cash in a few days, not weeks to months like with other solutions.
Convenience
24/7 online portal for payments, draw requests, and reviewing your line of credit.
No Setup or Annual Fees
Line sizes range from $26,000 to $60 million, with no initial draw required.
Attractive Interest Rates
Because your portfolio is collateral, rates are often lower than other lending options.
Both variable and fixed rate options are available.
Flexibility
Funds can be used for nearly any personal liquidity need — with no rigid repayment schedule.
Long-Term Investment Strategy Intact
Keep your investments and continue receiving dividends, interest, and appreciation.
Product Highlights
Terms
- Line amount is a percentage of the eligible securities’ value (100% of account must be pledged).
- Minimum line: $26,000 | Maximum: $60 million
- No minimum initial draw.
- Minimum subsequent draw: $25,000 (fixed) or $1,000 (variable)
- Funds accessible via ACH or wire transfer (wire min: $10,000).
- No standard draw or repayment period.
Interest Payments
- Monthly, based on 1-Month SOFR² + margin (for variable) or current fixed rate.
- Payments can be made via ACH, check, or an advance on the line.
Fees
No application fees
No maintenance fees
No prepayment fees
No wire fees
Collateral Allowed
- Common stocks / ADRs traded on Nasdaq or NYSE
- Government / municipal securities
- Corporate bonds
- Mutual funds
- Cash / Certificates of deposit (FDIC insured)
- Unit-traded funds
- Exchange-traded funds (ETFs)
- Non-traditional mutual funds
Things to Consider
An SBLOC line carries risks.
If your portfolio value drops below a certain level, you may be required to:
- Add additional securities or cash as collateral
- Pay down part of the loan immediately
- Allow liquidation of investments (which could cause tax consequences)
The lender may also:
- Suspend or terminate your line of credit
- Declare all indebtedness immediately due
- Sell collateral to maintain line-to-value requirement
- Require additional collateral or repayment to meet requirements
Important Information
¹ Please consult your tax advisor for any tax implications.
² The Secured Overnight Financing Rate (SOFR) formerly (LIBOR) is an interest rate benchmark measuring borrowing costs collateralized by U.S. Treasury securities. It replaced the LIBOR benchmark in the U.S. The 1-Month Term SOFR rates can be found at bit.ly/SOFR-CME.
