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Lombard Loan Advisory

What Is a Lombard Loan?

How Lombard Lending Works

Lombard lending is a popular form of secured financing where a borrower can access funds using their liquid assets as security. Popular liquid assets include cash, equities, or bonds. One of the advantages of this type of lending is that the borrower retains ultimate ownership of the assets, benefiting from any interest or dividends earned while still meeting short-term liquidity needs.
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Assets Commonly Used as Lombard Collateral

  • Bonds: Bonds are a common choice of collateral for Lombard loans due to their predictable cash flow. Lenders generally offer an LTV of between 70–90% on bonds, although the exact rate depends on the type of bonds. Government bonds are seen as lower risk than emerging market bonds.
  • Equities: Lombard loans secured against equities are seen as higher risk than those secured against bonds, as equities have a less predictable cash flow. Loan-to-value ratios on equity-backed loans are slightly lower than those on bonds, roughly between 50–70%. Blue-chip stocks are favoured over highly volatile or illiquid stocks.
  • Mutual Funds and ETFs: Open-ended mutual funds offer lenders a highly liquid, low-risk security and, as such, have higher LTVs than hedge funds or illiquid funds.
  • Cash: Cash is the most straightforward security offered by borrowers, posing the lowest risk to lenders. Loan-to-value ratios associated with cash loans are very high, typically between 90–100%.

When a Lombard Loan Is the Right Solution

Liquidity Without Disposing of
Investment Assets

Lombard loans enable the borrower to access short-term liquidity while retaining ownership of their assets. Borrowers can benefit from capital appreciation, dividends, and income from their assets while still accessing liquidity, without having to sell their holdings.

Short- to Medium-Term
Financing Requirements

While Lombard loans can be used as short, medium, or long-term solutions, they are better suited to short or medium terms. Common uses include bridging cash flow gaps, funding personal expenses, or taking advantage of short-term investment opportunities. Facilities can be flexible, but most tenors range from 1 to 36 months.

Portfolio Rebalancing and Opportunistic Investments

Borrowers can use Lombard loans to rebalance portfolios, shifting allocations or adjusting exposure across different asset classes while maintaining full ownership of their core holdings. Lombard loans also provide quick access to liquidity, allowing borrowers to take advantage of short-term opportunities.

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How Silver Oak Capital Can Help

  • Structuring Facilities Around Portfolio Objectives

    Silver Oak Capital has extensive experience structuring debt facilities across Europe. We leverage this experience to ensure our clients have access to the most cost-effective financing with minimal complexity.

  • Accessing Private Banks and Specialist Lenders

    While most private banks offer some form of Lombard lending, it is crucial to select the right institution to safeguard your assets. Silver Oak Capital has access to a network of hundreds of lenders, including private banks, and can connect clients with the most suitable institution.

  • Negotiating Advance Rates, Covenants, and Flexibility

    We have advised on numerous Lombard loan transactions, both in the UK and internationally. This experience makes us skilled negotiators, ensuring our clients’ needs are protected at all times.

FAQs

Lombard loans can be secured against any liquid assets, including cash, bonds, mutual funds, ETFs, and equities. The more liquid the asset, the higher the LTV offered. For example, Lombard loans secured against cash can have LTVs up to 100%, whereas loans secured against illiquid mutual funds or ETFs can be as low as 30–40%.

Lombard loans can be arranged quickly depending on the client’s circumstances. Long-term private banking clients with substantial deposits may have loans arranged in days, whereas new clients with limited assets under management may experience longer completion times.

The value of the collateral is closely monitored throughout the loan term. If the collateral drops below a certain threshold, lenders may take the following actions:

  • Margin Call: Request additional security to restore the agreed LTV.
  • Partial Loan Repayment: Reduce the LTV through partial repayment of the loan.
  • Forced Sale of Collateral: In more serious cases where the borrower cannot meet the margin call or make a partial repayment, the lender may sell the collateral

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