Using Lombard lending to maximise your wealth
What you need to know
- The loans can be arranged quickly with the funds used to finance investments, business plans or large purchases
- They allow users to remain invested in the market rather than having to sell some of your portfolio and disrupting your strategy
- Lombard loans from Rothschild & Co allow you to borrow money in cases where high street banks have found it difficult to lend
Every so often there is an opportunity where you need to act – and fast.
However, even the wealthiest people can find it difficult to obtain finance that suits their circumstances. You may have complex financial circumstances, such as low or irregular income. In other cases, the bulk of your wealth could be tied up in investments, or the value of a business.
As a result, access to cash – and the ability to make significant purchases or other investments – can be surprisingly limited.
However, Lombard lending, also known as portfolio lending, offers a solution to wealthy borrowers struggling to access cash.
It enables you to borrow against the value of your portfolio while ensuring your wealth remains invested, where it can continue to generate returns over the long term. This allows you to leverage your portfolio and seize new business opportunities. It also helps you avoid selling when market conditions are less favourable.
What is Lombard lending?
The Lombardy region of Italy has been home to banking houses for centuries. Money lenders in the area brokered financial deals for the rich and wealthy as far back as the 13th century.1
These banks offered loans against assets, and modern-day Lombard loans follow the same principle. Today banks offering Lombard loans use assets such as stocks and bonds as collateral against their loans.
These loans can be a fast and convenient way of financing large purchases, such as a classic car or a piece of fine art. It can also be used for private equity investments, gifting or loaning money to relatives, or funding the expansion of a business.
What are the benefits of Lombard loans?
There are many reasons to consider using Lombard lending. Entrepreneurs and business owners often use Lombard loans to leverage new opportunities or fund new business plans.
Crucially, they let users stay invested in the market, rather than having to sell off part of your portfolio to fund personal or business needs. This means you can avoid disrupting your current investment strategy.
By leveraging existing assets in this way, you can diversify your portfolio without committing additional funds, with the aim of generating additional income.
Entrepreneurs and business owners often use Lombard loans to leverage new opportunities or fund new business plans."
Lombard loans are often processed faster than other forms of financing since the value of the collateral is easily verifiable. This quick access to funds can be crucial for businesses, or individuals facing urgent liquidity needs or investment opportunities.
They are typically short-term which means borrowers are not tied into a long-term financial commitment when raising funds.
‘I’m buying back my former business using a Lombard loan’
When an opportunity presents itself, entrepreneurs know they need to seal the deal quickly before the chance disappears.
One of our clients had spent years building a successful business, and sold 75% of the company to another investor a few years ago.
However, the entrepreneur recently had a chance to buy back his stake in the business and take control of the company again.
The client didn’t want to use the proceeds of the original sale of the company to fund the repurchase as it had since been invested elsewhere. He had considered using debt financing secured by his stake in the business but was put off by the high cost of borrowing.
The client was instead able to successfully repurchase his stake by using a Lombard loan from Rothschild & Co, secured by investments managed by us, with a more attractive interest rate.
How can I take out a Lombard loan?
Most high street banks find unconventional financial profiles difficult to accommodate because their lending criteria are usually based on evidence of income.
Anyone who doesn't tick the right boxes may therefore struggle to access the money they need, when they need it. The slow pace of the approval process at traditional lenders can also mean missing out on exciting opportunities.
But wealth encompasses more than just income. It includes clients' portfolios, businesses, properties, and other assets, providing a comprehensive view of your overall financial standing.
Most high street banks find unconventional financial profiles difficult to accommodate because their lending criteria are usually based on evidence of income."
At Rothschild & Co, we pride ourselves on having enduring relationships with our clients, which grants us intimate knowledge of your financial circumstances, long-term goals, and family objectives. With this understanding, we can offer Lombard loans swiftly and securely when they are most needed.
Whether you're looking to borrow as an individual or through a trust, family investment company or other corporate ownership structure, we can create a solution tailored to you.
Throughout the lending process, we provide a dedicated point of contact to cater to your needs. Please get in touch with us to discuss your specific requirements.
Past performance is not a guide to future performance and nothing in this article constitutes advice. Although the information and data herein are obtained from sources believed to be reliable, no representation or warranty, expressed or implied, is or will be made and, save in the case of fraud, no responsibility or liability is or will be accepted by Rothschild & Co Wealth Management UK Limited as to or in relation to the fairness, accuracy or completeness of this document or the information forming the basis of this document or for any reliance placed on this document by any person whatsoever. In particular, no representation or warranty is given as to the achievement or reasonableness of any future projections, targets, estimates or forecasts contained in this document. Furthermore, all opinions and data used in this document are subject to change without prior notice.