For many investors, significant wealth is tied up in investment portfolios but accessing that wealth without disrupting a long-term strategy can be a challenge. A Securities-Backed Line of Credit (SBLOC) can offer a flexible way for some to unlock liquidity while remaining invested.
What Is an SBLOC?
A Securities-Backed Line of Credit (SBLOC) is a revolving line of credit that allows you to borrow against the value of your non-retirement investment portfolio without having to sell those assets. Much like a home equity line of credit, an SBLOC provides access to funds that you can draw on as needed, repay, and reuse over time.
How It Works
When establishing an SBLOC, eligible securities in your portfolio are pledged as collateral. The amount you can borrow is typically a percentage of the portfolio’s value, often ranging from 50% to 95%, depending on the asset mix and lender. Once approved: You can access cash quickly, often within days. Interest is charged only on the amount you draw, and payments are typically interest-only, with flexible principal repayment. Something to note, SBLOCs are considered non-purpose loans, meaning the proceeds cannot be used to purchase additional securities.
Why Investors Use SBLOCs
An SBLOC can be a powerful planning tool when used thoughtfully. Common use cases include:
• Funding a real estate purchase
• Covering tax liabilities
• Supporting business opportunities
• Managing short-term cash flow needs
One of the primary advantages of this tool is the ability to stay invested. Selling appreciated securities can trigger capital gains taxes and potentially disrupt a long-term investment strategy which is something an SBLOC could help avoid. Additionally, SBLOCs may offer competitive interest rates compared to traditional lending options, particularly for high-net-worth investors.
Is an SBLOC Right for You?
An SBLOC can be an effective solution for investors with substantial taxable assets who need short-term liquidity without disrupting their broader financial plan. It is often best suited for disciplined borrowers with a clear repayment strategy and a well-diversified portfolio. However, it is not a one-size-fits-all solution. Careful evaluation of your goals, risk tolerance, and overall financial picture is essential before incorporating an SBLOC into your strategy. Working one-on-one with your XML Wealth Advisor can help you understand if an SBLOC is right for you and your short and long-term financial goals. Source: https://www.fidelity.com/learning-center/smart-money/what-is-a-securities-backed-line-of-credit
Important Disclosures: To use this product, XML Financial Group initiates a securities-based loan request on your behalf through Goldman Sachs Private Bank. You then pledge one or more of your Fidelity advisory accounts as collateral. Goldman Sachs uses a digital platform and forms will be delivered and signed through DocuSign. There is no affiliation between XML Financial Group, its advisers and Goldman Sachs. Neither XML Financial Group nor its advisers receive compensation or financial incentives for offering this service to clients or for any loans that have been put in place.
The spouse of XML's CEO, Brett Bernstein, is an employee of Goldman Sachs Private Bank. She is not involved in soliciting loan business from XML nor does she receive direct compensation or financial incentives for business originating from XML.