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What Is a Securities-Backed Line of Credit (SBLOC)?

Imagine you need cash to fund a short-term business expense, take advantage of a real-estate opportunity, or cover another unexpected bill. You have plenty of assets in an investment account, but you’d rather not liquidate your securities to come up with the cash.

Enter a securities-backed line of credit (SBLOC). While this funding option might not be as widely known as traditional loans or lines of credit, it offers unique advantages for the right investor.

This article explains how SBLOCs work and why you might consider using one for a flexible, low-interest borrowing solution.


Explainer: Securities-Backed Line of Credit (SBLOC)

A securities-backed line of credit lets you borrow money using your securities — such as stocks, bonds, or mutual funds — as collateral. An SBLOC is similar to a home equity line of credit in that it’s a revolving line. You can draw funds from your line of credit, pay it back and draw funds again.

Unlike traditional loans, where collateral might include physical assets like real estate, SBLOCs are secured by the value of your investment portfolio. They allow you to borrow against the value of your portfolio without selling the underlying securities.

You can generally use the funds from an SBLOC for any purpose except purchasing securities.


How Does a SBLOC Work?

The process for getting a securities-backed line of credit is straightforward. In fact, for the right borrower, it can be much faster than getting a traditional mortgage or home equity loan. Each step is designed to ensure that your borrowing needs are met while maintaining the value of your investment portfolio.


  1. Establish the credit line. Ideally, you’ll already have an established investment account with the bank that offers SBLOCs. Talk to an advisor to start the application process. The institution will assess the value of your portfolio and establish a line of credit based on a percentage of that value — often between 50% and 95%.1
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The amount you can borrow with a SBLOC is a percentage of the value of your portfolio, typically anywhere from 50% to 95% of that value.

  1. Accessing funds. Once you establish the line of credit, you can draw from it as needed. You can use the funds for almost any purpose, including real estate investing, business expenses, or consolidating high-interest credit card debt.
  2. Repayment. You must begin making monthly interest-only payments on the amount borrowed once you draw funds from the line of credit. You can pay the outstanding principal at your discretion. As long as your account remains in good standing and the value of your securities stays above a certain threshold, you can continue to borrow and repay as needed.
  3. Maintaining collateral value. The bank will regularly monitor the value of your collateral. If the value of your securities drops and it can no longer support your line of credit, you’ll receive a “maintenance call.” You may need to deposit additional funds or securities or repay the loan within a specified period (usually two to three days).2 Otherwise, the lender can sell your securities and keep the cash.

Why Consider an SBLOC?

Here are a few reasons why an SBLOC might be right for you.


  1. No disruption to your investment strategy. Because you’re borrowing against your securities rather than selling them, you avoid triggering capital gains taxes and can continue to benefit from any appreciation in the value of your investments. This often appeals to investors who want to maintain their investment strategy while accessing needed funds.
  2. Low interest rates. SBLOCs typically offer lower interest rates than personal loans or credit cards. The rates are often variable and tied to a benchmark, such as the prime rate, making them more affordable for borrowers with significant assets.
  3. Potential tax benefits. Interest paid on an SBLOC may be tax-deductible, depending on how you use the proceeds. For example, if you use the money to buy rental real estate, you may be able to deduct the interest against rental income. Consult with a tax advisor for personalized advice that applies to your situation.

Is an SBLOC Right for You?

An SBLOC might be the right funding option if you have a substantial investment portfolio and need flexible, low-cost access to funds without disrupting your investment strategy. However, it’s important to weigh the pros and cons to ensure it aligns with your financial goals and risk tolerance.

Before deciding on an SBLOC, talk to a Synovus advisor who can provide personalized advice based on your financial situation and long-term goals.

Important disclosure information

This content is general in nature and does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information. Diversification does not ensure against loss.

  1. FINRA.org, “Securities-Backed Lines of Credit Explained,” published January 3, 2024. Accessed September 18, 2024. Back
  2. SEC.gov, “Investor Alert: Securities-Backed Lines of Credit,” updated February 6, 2017. Accessed September 18, 2024. Back