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November 7, 2025
Introduction
Selling investments to get cash can be costly and disruptive. Securities-based lending offers a better option, letting you borrow against your stocks and bonds without selling them. It’s a way to unlock liquidity while keeping your portfolio and your long-term strategy on track.
And for crypto holders, firms like Arch Lending offers similar solutions for Bitcoin.
What Is Securities-Based Lending?
A securities-backed line of credit (SBLOC) lets you use your investment portfolio as collateral for a loan, similar to a home equity line of credit, but secured by stocks or bonds instead of property.
Typically, you can use the funds for nearly anything except buying more securities. Eligible collateral often includes:
Publicly traded stocks
Government or corporate bonds
Mutual funds and ETFs
Money market funds
Loan-to-value (LTV) ratios typically range from 40–80%, depending on asset type and volatility. Highly volatile, single named stocks will get a lower LTV than a diversified ETF like S&P 500.
How It Works
Portfolio Review: The lender evaluates your holdings to determine borrowing capacity.
Credit Line Setup: A credit limit is established, around 40-80% of your asset value.
Funding: Once approved, you can draw cash through wire transfer or online access.
Ongoing Monitoring: The lender tracks your collateral value and may request more if markets fall, also known as a margin call.
Example:
With a $500,000 diversified portfolio and 60% LTV, you could access $300,000. Drawing $200,000 means you pay interest only on that amount.
Key Advantages
Keep Your Investments Working: Your assets remain invested, continuing to compound and earn dividends.
Tax Efficiency: Because you’re borrowing, not selling, you avoid capital gains taxes, a major benefit for appreciated holdings.
Fast Access: Funding often arrives same day and up to 72 hours, with minimal paperwork compared to traditional loans.
Compelling Rates: Rates are typically tied to SOFR + margin, reflecting the low risk of liquid collateral.
Flexible Repayment: Most loans are interest-only with no fixed term, giving you control over repayment timing.
Risks to Know
Market Volatility: Falling asset values can trigger a margin call or forced liquidation.
Margin Calls: If equity drops below required levels (often 30–35%), you may need to add collateral or face forced liquidation.
Variable Rates: Rising rates can increase your borrowing costs.
Concentration Risk: Borrowing against a single stock heightens exposure to company-specific swings.
How It Compares
Option | Pros | Cons |
|---|---|---|
Traditional Bank Loan | Fixed terms, predictable | Slow approval, heavy documentation |
Home Equity Line | Low rates | Tied to your home, appraisal needed |
Margin Loan | Quick access for trading | Higher risk, regulatory limits |
Credit Cards | Easy access | Very high interest |
Bitcoin-Backed Loan (Arch Lending) | Fast, no credit checks | Crypto is volatility |
Who It’s Best For?
Investors with diversified portfolios
Business owners needing short-term liquidity
Real-estate investors bridging financing gaps
Professionals with uneven income
Those facing large one-time expenses
Avoid it if you’re highly concentrated in one stock, can’t handle variable payments, or expect sharp market downturns.
Getting Started
Evaluate Your Portfolio: Many lenders require $100K minimum.
Compare Offers: Look at rates, fees, LTV ratios, and maintenance terms.
Understand the Terms: What happens if markets drop? Are there penalties?
Monitor Regularly: Keep your LTV below limits to avoid margin calls.
Bitcoin Alternative: Arch Lending
For Bitcoin holders, Arch Lending offers a similar approach to borrow against crypto without selling.
Why it stands out:
Secure custody: Assets stored with institutional partners, never rehypothecated.
No credit checks: Loans based solely on collateral.
Competitive rates: Often on par with securities-based loans.
Flexible use: Access liquidity for personal or business needs.
Bitcoin-backed loans share the same tax efficiency and speed as stock-backed ones.
Conclusion
Borrowing against stocks can provide fast, tax-efficient liquidity while letting your portfolio compound. The strategy works best for investors who understand the risks of leverage and maintain strong risk management.
Done right, your investments can power both your long-term growth and your short-term flexibility.
Frequently Asked Questions
What's the difference between securities lending and margin trading?
Securities lending provides cash for any purpose except buying more securities, with lower risk and maintenance requirements. Margin trading specifically funds additional stock purchases, carries higher risk, and faces stricter regulations.
How much can I borrow against my stocks?
Borrowing capacity depends on your portfolio composition and lender policies. Conservative portfolios of blue-chip stocks typically qualify for 50-70% LTV, while government securities might reach 90%. Most lenders set minimums around $100,000.
What happens if the market crashes?
Market downturns reduce your collateral value, potentially triggering margin calls. If your equity drops below required levels, you must add cash or securities quickly. Failure to meet calls can force liquidation at unfavorable prices.
Are there tax implications?
Borrowing against securities isn't taxable, making it tax-efficient compared to selling. However, interest payments might be deductible depending on fund usage. Consult a tax advisor for your specific situation.
How does Bitcoin lending compare to stock lending?
Bitcoin lending through companies like Arch Lending offers similar benefits, quick liquidity, no taxable events, competitive rates, with some advantages like no credit checks and 24/7 processing. The main difference is collateral type and potentially higher volatility considerations.
About Arch
Arch is building a next-gen wealth management platform for individuals holding alternative assets. Our flagship product is the crypto-backed loan, which allows you to securely and affordably borrow against your crypto. We also offer access to bank-grade custody, trading and staking services.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. Cryptocurrency investments are volatile and risky. Always conduct your own research before making investment decisions.