Lombard lending, sometimes referred to as Lombard Credit or portfolio lending, is one of the most established forms of secured borrowing, with origins stretching back to Renaissance Italy. The term itself comes from the Lombardy region, where innovative bankers pioneered the idea of lending against valuable collateral. While centuries have passed, the essence of Lombard lending remains the same: it allows clients to unlock liquidity without selling their investments.
The mechanism is simple. Instead of liquidating assets such as equities, bonds and funds, an investor pledges them as collateral. These assets typically make up a well-diversified portfolio held in an ISA, General Investment Account or an off-shore bond -pensions are deemed ineligible.
A lender then assesses the quality and liquidity of the portfolio, applies a loan-to-value (LTV) ratio, and determines how much can be borrowed. The process is often described as a “mortgage against a portfolio.”
Because portfolios are priced daily, the valuation process is swift and transparent, enabling lending facilities to be set up within days rather than months. Clients can draw down funds as and when needed, repay flexibly, and only pay interest on the balance actually used.
For many years, these loans were reserved exclusively for ultra-wealthy private banking clients, often requiring millions in investable assets. That exclusivity meant many high net worth individuals were excluded. Today, however, wealthtech innovation has changed the landscape. Digital platforms like ours have streamlined onboarding, automated collateral monitoring, and integrated risk models, making Lombard lending available to a broader range of investors, with portfolios starting from £150,000.
The Benefits of Lombard Lending
The benefits of Lombard lending are clear for investors. They can continue to commit to long-term investment strategies, keep their tax wrappers intact, and preserve voting rights and dividend entitlements. Accessing liquidity in this way avoids the need to crystallise gains and potentially trigger Capital Gains Tax. In practical terms, a portfolio worth £500,000 could unlock £250,000 in available liquidity, providing meaningful flexibility without disrupting investment goals.
For wealth managers, the benefits are also significant. By offering Lombard Credit directly, or through a fintech partner, they can deliver liquidity solutions that prevent clients from switching to private banks. Retaining Assets under Management becomes easier, while the advisory relationship deepens. Clients increasingly expect their wealth manager to provide access to these tools, and firms that cannot do so risk losing relevance.
It’s Important to Consider the Risks Too
- There’s a risk investment value will fall and trigger a margin call, requiring you to provide extra capital or for investments to be sold.
- If interest rates rise, the cost of the loan interest could increase too, requiring you to pay more per month.
- Further liquidity might be needed to maintain the loan, in which case extra capital is required from a source other than the loan.
- Tax risk – the risk that selling investments within a tax-efficient wrapper may cause the tax benefits to be invalidated, is a consideration too.
The amount we lend, and the level which triggers a margin call, have been set to minimise risk but it’s important to understand the potential for such risks. Potential borrowers should be well-equipped to deal with any circumstances that arise.
Ultimately, Lombard lending represents a rare blend of tradition and innovation. Rooted in centuries-old banking practices, it has been revitalised by modern technology to serve the needs of today’s affluent investors. It is a way to achieve immediate liquidity without compromise, keeping portfolios intact while addressing the realities of life events, opportunities, and financial planning requirements.
To read more about Lombard lending, you can download our whitepaper here.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Wealth managers must seek appropriate regulatory permissions before introducing or advising on Lombard lending solutions.
