The margin call process is the single biggest operational difference: Lombard lenders negotiate, SBL platforms liquidate. That gap matters most in a volatile market when your largest positions are also your most concentrated.
Lombard Loan
A Lombard loan is a private bank product, almost always extended by a European or Swiss institution such as Julius Baer, Pictet, or UBS, to clients who custody assets at that same bank. Rates typically run SOFR or EURIBOR plus 0.5 to 1.5 percent for strong clients, and loan-to-value ratios on blue-chip equity portfolios land between 50 and 70 percent. The key advantage is flexibility: eligible collateral can include bonds, equities, fund units, structured notes, and in some cases art or private equity positions held in custody. Margin calls are handled by a private banker who may give you days to respond rather than liquidating automatically, which is a structural edge that retail SBL platforms simply do not offer. For a deeper look at where rates actually land across providers, Best Lombard Loan Rates covers the current spread across Swiss, Singaporean, and UAE private banks.
Securities-Based Lending
Securities-based lending is the broader category that includes broker-dealer products offered by firms like Merrill Lynch, Morgan Stanley, Schwab, and Fidelity under names such as Pledged Asset Line or Portfolio Line of Credit. These are available to clients with as little as $100K in marginable securities, making them far more accessible than private bank Lombard facilities. LTV ratios are generally 50 to 65 percent on diversified equity portfolios, and rates are competitive, often in the 5 to 7 percent range for mid-tier balances in a normal rate environment, though this varies significantly with benchmark rates. The critical drawback is automation: many SBL platforms trigger automatic liquidation when a maintenance threshold is breached, giving borrowers little or no time to deposit additional collateral.
Tax Positioning and Buy-Borrow-Die Fit
Both structures share the core tax advantage of the buy-borrow-die play: borrowed proceeds are not income, so you access liquidity without triggering capital gains on appreciated positions. The Lombard structure has a practical edge here because private banks in Switzerland, Singapore, and Dubai routinely accommodate concentrated single-stock or fund positions that a US broker-dealer SBL program might exclude or heavily haircut. If you are running an estate plan where the goal is never to sell, the Lombard structure at a non-US private bank adds a layer of asset protection and jurisdictional distance that a domestic SBL account does not. SBL at a US broker is simpler operationally but sits squarely within domestic reach for creditors and the IRS.
Which Structure to Use
Use SBL if you have a diversified US equity or bond portfolio between $100K and $2M, need fast setup (most platforms approve in days), and want a straightforward revolving credit line for liquidity management. Move to a Lombard loan when your portfolio exceeds $2M, when you hold non-standard collateral such as fund units or structured products, when you want currency flexibility, or when you need a private banker to actively manage margin call risk rather than an automated system. For clients building a multi-jurisdictional structure, the Lombard facility at a Swiss or Singapore private bank pairs naturally with a family office holding company in a zero-tax jurisdiction, giving you borrowing, custody, and estate planning inside one coherent architecture.
Things people ask first.
Is a Lombard loan the same as securities-based lending?
A Lombard loan is a specific type of securities-based lending offered by private banks, typically with more flexible collateral rules and a human-managed margin call process. SBL is the broader category that includes both private bank Lombard facilities and retail broker-dealer credit lines.
Which has lower interest rates, a Lombard loan or SBL?
For large portfolios at a relationship private bank, Lombard rates can be tighter than retail SBL rates, often benchmark plus 0.5 to 1 percent versus 5 to 7 percent or more at a broker-dealer in a higher-rate environment. The gap narrows for smaller balances where private bank minimums push clients toward SBL.
Can I use SBL proceeds to buy real estate or invest in a private business?
Most US broker-dealer SBL agreements explicitly prohibit using proceeds to purchase securities or invest in a business. Lombard loans from private banks are generally less restrictive, though specific use-of-proceeds terms vary by lender and jurisdiction.
What happens if my portfolio drops and I get a margin call on an SBL account?
At most retail SBL platforms, breaching the maintenance threshold triggers an automated liquidation of positions to restore the required ratio, often without prior notice. A private bank Lombard lender will typically contact you first and allow time to post additional collateral or pay down the balance.
How does either structure help with the buy-borrow-die strategy?
Both let you borrow against appreciated assets without selling, so you access cash without a taxable event. When you die, heirs receive a stepped-up cost basis on the underlying assets, and the loan is repaid from the estate, meaning the embedded gain may never be taxed.
Do I need to move my assets to the lender's custody for a Lombard loan?
Yes, in almost all cases. A Lombard loan requires the pledged assets to be held in custody at the lending institution, which is why opening a private banking relationship is a prerequisite. SBL through a broker-dealer similarly requires the assets to be held in an account at that firm.
Ready to build the full borrow-without-selling structure?
The Offshore Playbook details how to combine a private bank Lombard facility with the right holding company and estate structure so you access liquidity, avoid capital gains, and pass assets to heirs with minimal friction. Gramps.chat can walk you through the specific jurisdiction and lender fit for your portfolio size.
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