Access the capital you need with securities-based lending
Securities-based lending offers offer quick access to capital in lieu of raising cash through the sale of securities.
What is securities-based lending?
Securities-based lending refers to the practice of using marketable securities such as stocks, bonds and other eligible securities held in non-retirement accounts as collateral for a line of credit with J.P. Morgan Chase Bank N.A. (Chase Bank).
Why do clients use securities-based loans?
Clients often need capital to facilitate large transactions like real estate purchases or strategic investment opportunities, bridging cash flows or managing unexpected expenses.
Why consider securities-based lending?
By offering flexible access to liquidity as an alternative to selling assets, securities-based lending can help clients maintain their long-term investments plan.
What are the risks of securities-based lending?
As with all investment decisions, it's important to understand the risks of borrowing before moving forward. Events beyond your control like market fluctuations that may reduce the value of your pledged securities, could lead to a margin call.
We're here to help you understand the risks and benefits of securities-based lending and help you make the decisions that fit your needs.
Why work with J.P. Morgan
- Benefit from flexible borrowing with no setup fees. Only incur interest on the funds you use.
- Gain access to liquidity for a range of uses, such as a home renovation or a real estate purchase.
- Remain invested in your assets while structuring your borrowing in a potentially tax-efficient way.
- Manage your securities-based line of credit from anywhere with the Chase Mobile® app.
Work one-on-one with a Private Client Advisor
Work one-on-one with a dedicated advisor in your local community to create a personalized financial strategy and build a custom investment portfolio.
Already work with an advisor?
Contact your Private Client Advisor to learn more about how securities-based lending can fit into your investment plan.
Frequently asked questions
SBL stands for securities-based lending and refers to the practice of using non-retirement, marketable securities such as stocks, bonds and mutual funds as collateral for a line of credit with J.P. Morgan Chase Bank N.A. (Chase Bank).
Securities-based lending works by using securities as collateral for lines of credit. Borrowers typically pay interest only on the amount borrowed at rates that may be more competitive than other forms of borrowing.
As a condition of the loan, the lender normally places a pledge on securities held on the investment account. Lenders therefore become the lienholder of the account, meaning they have a legal claim to its contents should a borrower default on the loan or fail to meet a collateral call.
Securities-based lending carries different risks. For one, securities-based lines of credit are typically based on adjustable interest rates. This may increase your cost of borrowing if rates increase.
In addition, if the market value of the securities that are being used as collateral declines, a line of credit may be subject to a maintenance call. In this scenario, borrowers in a shortfall may be required to deposit funds equal to or greater than the call amount, deposit securities with loan value equal to or greater than the call amount, sell securities with enough lending value to meet or exceed the call amount or otherwise pay down the loan.
Similarly, in the event of a default on the line of credit, the lender has the right to sell securities to satisfy your obligation.
The portfolio line of credit has risks and therefore may not be appropriate for all investors. Before considering a portfolio line of credit, you should understand the following:
- Securities-based lending is based on variable Secured Overnight Financing Rate (SOFR) daily; loan rates are floating, not fixed, so there is interest-rate risk.
- Your eligible securities are the collateral for your portfolio line of credit and, if they decrease in value and are no longer sufficient to support the line of credit, you may be required to deposit additional funds to meet a collateral shortfall or pay down the line of credit.
- You should be mindful that liquidation can occur to meet margin calls or if the value of the investment declines below the amount of the credit line.
- Any or all of your securities can be sold to meet a collateral shortfall without your notification.
- Lending values and securities eligible for collateral may change from time to time subject to the banks discretion without advance notice.
- Borrowing privileges can be terminated at any time.
The deductibility of interest paid on securities based loans is dependent on the structure of the loan facility and the use of loan proceeds. To determine whether your line of credit could offer you the ability to deduct the interest paid, you should speak to your tax professional.
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