Securities-Based Lending: When Borrowing Can Be a Smart Strategy

Published: August 12, 2025

When Borrowing Can Be Strategic

When it comes to personal finance, conventional wisdom says the best way to live is debt-free. And for many, that’s true. But for high-net-worth individuals, borrowing can be more than just taking on debt; it can be a strategic borrowing strategy that preserves liquidity, avoids unnecessary taxes, and keeps long-term goals on track.

The most successful companies in the world all manage both assets and liabilities. Individuals can use the same approach, leveraging borrowing as a tool to create flexibility without sacrificing growth. One powerful example is securities-based lending, where your investments serve as collateral for liquidity needs.

It may seem counterintuitive to borrow when you already have substantial assets, but under the right circumstances, borrowing can be an advantage, not a burden.

Key Benefits of Borrowing Strategically

Borrowing can provide high-net-worth individuals with flexibility that goes beyond what traditional savings or liquid cash allow. Some key benefits of borrowing include:

1. Leveraging Investments

Borrowing allows your assets to remain invested and potentially grow. Selling investments to fund short-term needs can trigger capital gains taxes, while borrowing against your portfolio preserves your growth potential.

2. Preserving Liquidity

Debt can provide the cash needed for large purchases while keeping your cash reserves intact for emergencies or other opportunities.

3. Tax Efficiency

In some cases, interest on debt may be tax-deductible. (For details on investment interest deductibility, see the IRS - Investment Interest Expense.)

Used strategically, debt can enhance your financial position, and when managed wisely, it can be a powerful tool, rather than a burden. For investors, borrowing isn’t always about covering a shortfall; it’s often about preserving wealth.

Securities Based Lending Explained

Securities-based lending (SBL) is a solution that allows you to use eligible securities in your portfolio as collateral for a line of credit. With SBL, you can borrow against assets without selling them, giving you flexibility while maintaining your investment strategy.

This approach can be especially useful for high-net-worth clients who:

• Need liquidity for large purchases or investments.
• Want to avoid selling assets and realizing capital gains.
• Run businesses that require temporary cash flow support.

Unlike a traditional loan, securities-based lending solutions are often quicker to arrange and can be tailored to fit unique financial circumstances.

Borrowing Options for High-Net-Worth Individuals

While a variety of borrowing options exist that high-net-worth individuals may find advantageous in different scenarios, here are a few examples:

Securities-Based Lending

The most common solution for borrowing against assets, SBL allows investors to unlock liquidity while keeping portfolios intact. It can be a valuable option for business owners, investors, or anyone looking to preserve long-term growth.

Tailored Lending

Tailored lending allows you to use collateral such as control/restricted securities, hedge funds, exchange funds, American depository receipts (ADRs), non-investment grade bonds and over advances on typical SBL collateral to borrow.

Mortgage Lending

When you’re thinking about purchasing a home—whether a primary residence, vacation home, or a property for children—mortgage lending may be a smart strategy, offering many of the benefits mentioned above. Mortgage lending isn’t one-size-fits-all. There are several loan options and strategies available. For instance, a pledged asset mortgage allows you to pledge a portion of your investment portfolio as collateral in lieu of a traditional cash down payment, allowing you to keep your assets invested as is.

Scenarios Where Borrowing Makes Sense

Borrowing isn’t just for emergencies; it can also be a strategic tool for milestones and opportunities. Here are some scenarios where borrowing against assets may be a smart choice:

• Unexpected Expenses - If you face a sudden need for significant cash, such as a major home repair or medical event, borrowing provides fast liquidity without forcing you to sell investments in a downturn.
• Life Milestones - Supporting adult children with weddings, education, or their first home purchase can often be funded through strategic borrowing instead of liquidating assets.
• Business Growth - High-net-worth individuals who own businesses may use lending strategies to fund expansion or bridge short-term cash flow needs while keeping portfolios intact.
• Real Estate Investments - Financing a new property or vacation home can be easier with a pledged asset mortgage, which uses investments as collateral rather than tying up cash reserves.
• Luxury Purchases - Large discretionary purchases, such as a yacht or classic car, can be funded strategically to avoid interrupting long-term growth.

In each of these situations, strategic borrowing offers flexibility while allowing your long-term wealth to continue compounding.

Planning for Repayment

Every borrowing strategy should include a thoughtful repayment plan. Strategic borrowing means not only using debt wisely, but also ensuring repayment aligns with your broader goals. With a clear strategy, you can use borrowing to your advantage without sacrificing financial security.

Advanced Concepts: The Buy Borrow Die Strategy

One concept gaining attention is the buy borrow die strategy. It works like this:

1. Buy assets and allow them to appreciate.
2. Borrow against those assets instead of selling them, preserving growth and avoiding capital gains taxes.
3. Upon death, heirs receive a “step-up” in basis, potentially eliminating taxes on past gains.

This buy borrow die method is sophisticated and not without risks. It requires careful planning with a financial advisor and tax professional. But for ultra-high-net-worth individuals, it demonstrates how borrowing can be more than just debt - it can be part of generational wealth planning.

FAQs About Securities-Based Lending and Borrowing Strategies

What is securities-based lending, and how does it work?
Securities-based lending allows investors to borrow against eligible securities in their portfolio without selling them, providing liquidity while keeping assets invested.

What are the benefits of borrowing against assets?
Benefits include tax efficiency, preserved liquidity, and the ability to leverage investments without disrupting long-term growth.

When does borrowing make financial sense?
Borrowing can make sense for emergencies, major purchases, business opportunities, or real estate investments when selling assets would disrupt your financial plan.

What is the buy borrow die strategy?
It’s a high-net-worth wealth strategy that uses borrowing against assets to avoid capital gains during life and take advantage of a step-up in basis at death.

Borrowing as Part of a Comprehensive Plan

Whether planning for emergencies or celebrating life milestones, borrowing can be a powerful tool when managed carefully. At Hall Financial Advisors, we help clients evaluate securities-based lending and other borrowing options to ensure that their strategies align with their long-term financial goals.

Ready to explore whether borrowing fits into your wealth plan? Schedule a no-obligation consultation today.

 

Disclaimer: Changes in tax laws or regulations may occur at any time and could substantially impact your situation. While we are familiar with the tax provisions discussed, Hall Financial Advisors and Raymond James are not qualified to render tax or legal advice. Please consult a qualified professional regarding any tax or legal matters.

A Securities Based Line of Credit (SBLC) may not be suitable for all clients. The proceeds from an SBLC cannot be (a) used to purchase or carry securities; (b) deposited into a Raymond James investment or trust account; (c) used to purchase any product issued or brokered through an affiliate of Raymond James, including insurance; or (d) otherwise used for the benefit of, or transferred to, an affiliate of Raymond James. Raymond James Bank does not accept RJF stock or any securities issued by affiliates of Raymond James Financial as pledged securities towards an SBLC. Borrowing on securities based lending products and using securities as collateral may involve a high degree of risk including unintended tax consequences and the possible need to sell your holdings, which may lead to a significant impact on long-term investment goals. Market conditions can magnify any potential for loss. If the market turns against the client, he or she may be required to quickly deposit additional securities and/or cash in the account(s) or pay down the loan to avoid liquidation. The securities in the Pledged Account(s) may be sold to meet the Collateral Call, and the firm can sell the client’s securities without contacting them. A client is not entitled to choose which securities or other assets in his or her account are liquidated or sold to meet a Collateral Call. The firm can increase its maintenance requirements at any time and is not required to provide a client advance written notice. A client is not entitled to an extension of time on a Collateral Call. Increased interest rates could also affect SOFR rates (or any successor rate thereto) that apply to your SBLC causing the cost of the credit line to increase significantly. The interest rates charged are determined by the market value of pledged assets and the net value of the client’s non-pledged Capital Access account.

Securities Based Line of Credit provided by Raymond James Bank. Raymond James & Associates, Inc. and Raymond James Financial Services, Inc. are affiliated with Raymond James Bank, member FDIC.