Securities-Backed
Lending Checklist

Is your portfolio diversified across 10+ positions or broad ETFs?

Diversified portfolios receive higher advance rates and are far less likely to trigger margin calls. Single-stock portfolios face gap risk that can blow through maintenance levels overnight.

If concentrated in one stock — is it a mega-cap with high liquidity?

Apple, Microsoft, Alphabet, and Amazon are safer single-stock collateral than mid-caps or pre-revenue companies. But even Mag 7 stocks can decline 30–60% (Meta in 2022: −64%).

Are your shares fully vested, unrestricted, and free of lock-ups?

Restricted shares, unvested RSUs, and shares subject to lock-up agreements cannot serve as collateral. Verify with your stock plan administrator.

What percentage of your net worth does this portfolio represent?

If this portfolio is 80%+ of your net worth, borrowing against it creates existential risk. A margin call could force liquidation of your primary wealth asset at the worst time.

Do you have other assets or income to handle a margin call?

If the only way you can respond to a margin call is by liquidating the pledged securities themselves, you're structurally trapped. External resources (cash savings, home equity, income) provide a safety net.

What is the interest rate, and is it variable or fixed?

Most SBLOCs are variable (SOFR + spread). Know the current rate AND the mechanism by which it can change. If SOFR was near zero in 2021 and over 5% in 2023, your rate can change dramatically.

What is the total credit line size vs. your planned draw?

The gap between your draw and your maximum determines your cushion. Drawing 80% of available credit leaves almost no buffer. Target drawing less than 50% of your maximum credit line.

What is the advance rate assigned to your specific securities?

Don't assume a standard rate. Ask the lender exactly what advance rate applies to each holding in your portfolio. Concentrated positions, sector ETFs, and volatile stocks may receive lower rates than you expect.

What is the maintenance requirement?

This is the minimum equity level you must maintain. If maintenance is 30%, calculate exactly what market decline would trigger a call from your current draw level. Write that number down.

Are there origination fees, annual fees, or early termination fees?

Some lenders charge setup fees, annual maintenance fees, or penalties for closing the line early. These costs should be factored into your total borrowing cost comparison.

Can you repay anytime without penalty?

Most SBLOCs allow flexible repayment, but verify. Some structured loans have minimum draw periods or prepayment penalties that limit flexibility.

Is there a fixed maturity date, or is the line revolving?

Some credit lines are evergreen (no maturity). Others have annual renewal requirements or fixed terms. Know when the lender can demand full repayment.

What happens if your portfolio declines 20%?

A 20% decline is routine — it happens roughly once every 3–4 years. Calculate your LTV at −20%. If you'd already be in maintenance territory, you're borrowing too aggressively.

What happens if your portfolio declines 40%?

A 40% decline is severe but not unprecedented (2008, 2020 brief). If this level triggers forced liquidation of your entire pledged portfolio, you need to borrow less or use different collateral.

What happens if your portfolio declines 50%+ (concentrated stock)?

Individual stocks routinely decline 50%+ (Meta 2022: −64%, Netflix 2022: −51%, Nvidia 2022: −66%). If your collateral is concentrated, model this scenario explicitly.

How many days do you have to respond to a margin call?

Ask the lender directly. Most provide 3–5 business days, but under FINRA rules they are NOT required to give any notice. In extreme market conditions, liquidation can be immediate.

Do you have cash reserves equal to 6+ months of interest?

If your income is disrupted (layoff, business slowdown) while carrying this debt, can you continue servicing it? Cash reserves prevent desperation liquidation at the worst time.

What is your pre-planned response to a margin call?

Decide NOW — not during a panic. Will you deposit additional cash? Transfer other securities? Allow partial liquidation? Repay the loan? Having a plan prevents emotional decisions under pressure.

Would selling instead of borrowing trigger significant capital gains?

Calculate the exact tax cost of selling. If it's less than 2–3 years of interest expense AND you don't have a clear repayment plan, selling may actually be cheaper.

Are you subject to employer trading windows or insider restrictions?

If your collateral is employer stock, a margin call during a blackout window could be catastrophic — you may be unable to respond while the stock continues falling.

Does your employer require pre-clearance for pledging company stock?

Many companies at VP+ levels require disclosure or approval before pledging shares. Failure to disclose could violate employment agreements.

Is interest on this loan potentially tax deductible?

Interest is only deductible if proceeds are used for investment purposes (investment interest expense, limited to net investment income). Interest on personal-use proceeds is generally not deductible.

Have you signed the Purpose Statement (Form U-1)?

For non-purpose SBLOCs, you'll certify that proceeds won't be used to buy securities. Violating this restriction could result in the loan being called immediately and potential regulatory consequences.

Have you consulted a CPA or financial advisor?

Securities-backed lending has complex tax, estate, and financial planning implications. Professional advice helps ensure you're not creating unintended consequences.