Lombard lending allows individuals to borrow against eligible investments without having to sell those assets. Typically used by high-net-worth clients, Lombard loans can provide access to liquidity while an investment portfolio remains invested. The lending is usually secured against a portfolio of eligible assets, which may include shares, bonds, funds and other marketable securities. The amount available will depend on the value, composition and risk profile of the portfolio, as well as the lender’s individual criteria.
Magni Finance works with private banks and specialist lenders to arrange Lombard finance for UK and international clients who require flexible borrowing against their investment portfolios.
Lombard Finance is referred to a third party. Neither Magni Finance nor PRIMIS are responsible for the service received. These services are not regulated by the Financial Conduct Authority and may have limited consumer protection.
What Is Lombard Finance?
Lombard finance is a form of secured lending that allows a borrower to raise funds against an investment portfolio. Rather than selling investments to generate cash, eligible assets are pledged to the lender as security for the loan. The portfolio will typically consist of liquid, marketable investments such as listed shares, bonds and investment funds. The lender assesses the individual assets within the portfolio and determines how much it is prepared to lend against them.
As the investments remain in the portfolio, the borrower can retain exposure to their investments while accessing liquidity for other purposes. However, the value of investments can rise or fall, so lenders will normally monitor the portfolio throughout the term of the facility.
How Do Lombard Loans Work?
A Lombard loan is secured against an eligible investment portfolio. The lender assesses the assets within the portfolio and assigns a lending value based on factors such as the type of investment, liquidity, volatility, diversification and currency. Once the facility is established, the borrower can draw funds up to the agreed limit. Depending on the lender and structure, the facility may provide flexibility over how and when funds are drawn and repaid.
The investment portfolio remains pledged to the lender while the borrowing is outstanding. If the value of the portfolio falls significantly, the lender may require the borrower to provide additional security, repay part of the loan or take other action to bring the facility back within the agreed lending limits. For this reason, both the initial loan-to-value and the composition of the investment portfolio are important when structuring Lombard lending.
How Much Can You Borrow With a Lombard Loan?
The amount available through Lombard lending will depend primarily on the value and composition of the investment portfolio being used as security. Different investments can attract different lending values. A diversified portfolio of liquid, lower-volatility assets may support a higher level of borrowing than a portfolio concentrated in a small number of shares or more volatile investments.
Lenders may also consider factors such as the currencies involved, the size of the portfolio, the amount being borrowed and the client’s wider financial position. For larger portfolios and borrowing requirements, private banks may structure Lombard facilities on a bespoke basis, with the lending terms determined by the individual assets and circumstances of the client.
What Are the Advantages of Lombard Loans?
Lombard lending can provide high-net-worth clients with access to liquidity without requiring them to sell investments. This can be useful where a client wants to retain their investment strategy while raising funds for another purpose, such as a property purchase, investment opportunity, business requirement or other significant expenditure.
Lombard facilities can also offer flexibility. Depending on the lender and structure, borrowers may be able to draw and repay funds as required rather than arranging a new loan each time capital is needed. For clients with substantial investment portfolios, Lombard lending can form part of a wider private banking relationship and may be considered alongside other borrowing options when deciding how best to raise capital.
What Are the Risks of Lombard Lending?
Lombard lending is secured against investments whose value can fluctuate, so borrowers need to understand the risks as well as the potential benefits. If the value of the pledged portfolio falls, the lending value available against it may also decrease. Depending on the terms of the facility, the lender could require additional assets to be pledged or part of the borrowing to be repaid.
If the borrower is unable to meet the lender’s requirements, investments may ultimately need to be sold to reduce or repay the outstanding borrowing. Interest rates may also be variable, meaning the cost of borrowing can change during the life of the facility. The suitability of Lombard lending therefore depends on the client’s circumstances, portfolio and ability to manage changes in both investment values and borrowing costs.
Who Is Eligible for Lombard Lending?
Lombard lending is generally designed for clients who hold a substantial portfolio of eligible investments that can be pledged as security. Eligibility will depend on the lender, the size and composition of the portfolio, the amount of borrowing required and the client’s wider circumstances. Some lenders may also have minimum portfolio or borrowing requirements.
Both UK and international clients may be able to access Lombard lending, although the available lenders and structures can vary depending on residency, domicile, the location of the assets and other factors. For high-net-worth clients with more complex circumstances, private banks can often assess the overall relationship rather than considering the Lombard facility in isolation.
How Do You Apply for a Lombard Loan?
The first step is to assess the investment portfolio that will be used as security, alongside the amount of borrowing required and the purpose of the funds. Magni Finance can review these requirements before approaching suitable private banks and specialist lenders.
The lender will then assess the portfolio, including the type, value, liquidity and diversification of the underlying investments. Once suitable terms have been identified, the lender will complete its underwriting and due diligence before establishing the facility and taking security over the agreed investment portfolio. For larger or more complex cases, the structure can be tailored around the client’s portfolio, borrowing requirements and wider financial circumstances.
Arrange Lombard finance with Magni Financ
Magni Finance works with private banks and specialist lenders to arrange Lombard loans for high-net-worth clients with substantial investment portfolios. We can assess your portfolio, borrowing requirements and wider circumstances before approaching suitable lenders to identify an appropriate structure.
Whether you are looking to raise capital for a property purchase, investment opportunity, business requirement or another purpose, we can discuss the Lombard lending options available to you. Speak to Magni Finance to discuss your Lombard finance requirements.