How to leverage your current portfolio to grow your financial flexibility
By Rob McCaslinExecutive Vice President
Individuals and businesses are constantly seeking innovative ways to leverage their assets for growth and financial flexibility, and a powerful tool that can be used in gaining status is Securities-Based Lending (SBL). This financial strategy allows borrowers to use their investment portfolios as collateral for loans, providing a range of benefits that extend beyond traditional lending methods.
Liquidity Without Liquidation
One of the key advantages of SBL is the ability to access liquidity without selling your investment holdings. Rather than liquidating assets and potentially incurring capital gains taxes, individuals can use their investment portfolio as collateral to secure a loan, allowing them to maintain their investment position and avoid long-term financial disruption.
Flexible Loan Terms
Securities-Based Lending offers borrowers flexibility in structuring loan terms. With variable interest rates and various repayment options, individuals and businesses can tailor the terms of the loan to their specific financial needs. This flexibility allows for strategic planning and aligning loan repayment with expected cash flows or market conditions.
Quick and Efficient Access to Capital
Traditional loans often involve a lengthy approval process with extensive paperwork and stringent credit checks. While SBL typically offers a quicker and more streamlined approval process by using the investment portfolio as collateral, giving lenders access to the value of the assets and expedite the approval.
Securities-Based Lending enables borrowers to maintain a diversified investment portfolio while accessing capital. Diversification is a key principle of sound financial planning, helping to spread risk and enhance the potential for returns. SBL allows individuals to keep their portfolio intact, ensuring they continue to benefit from a well-balanced mix of investments.
Potential Tax Efficiency
In some cases, SBL can offer tax advantages compared to traditional loans. Since borrowers are not selling their investments, they may avoid triggering capital gains taxes. Additionally, the interest paid on SBL loans may be tax-deductible, providing potential tax benefits for borrowers.
Securities-Based Lending emerges as a powerful financial tool that aligns with the evolving needs of investors and businesses. By leveraging investment portfolios as collateral, borrowers can unlock liquidity, maintain portfolio diversification, and enjoy flexibility in loan terms. While SBL may not be suitable for everyone and carries its own set of risks, its benefits make it a compelling option for those seeking innovative ways to optimize their financial strategies.
Rob McCaslin is the Director of Business Development at Kompass Funding – a financial solutions partner offering four niche solutions: Kompass Accelerate, Kompass 24, Kompass Access and Kompass Bridge. Partnering with growth-oriented companies and bridge financial gaps to help all stakeholders win by simplifying cash flow, covering payroll expenses, providing immediate funds for growth and minimizing time collecting payments.