Securities-based line of credit (SBLOC)
A revolving credit line, usually from a bank or broker, secured by a pledged investment portfolio and not allowed to be used to buy securities.
Credit available = Σ (value of each holding × its advance rate) ; LTV = Loan ÷ Collateral
Explanation
A securities-based line of credit (also called a pledged asset line or portfolio line of credit) is secured by investments held in a pledged account, typically at the lender’s affiliated brokerage. You can draw and repay as you like, and many lenders require only monthly interest payments.
How it differs from a margin loan:
- Non-purpose loan. SBLOC proceeds cannot be used to buy or carry securities, or to pay down a margin loan. They are meant for things like a home purchase bridge, taxes, a business or living expenses.
- Interest is generally not deductible as investment interest, because the money is not used to buy investments.
- Advance rates vary by holding: often around 50% to 70% for diversified stock portfolios and funds, higher for Treasuries and investment-grade bonds, and lower (or zero) for concentrated, volatile or thinly traded stocks.
- Minimums: many lenders require $100,000 or more in eligible assets.
- Rates are usually variable, often a benchmark such as SOFR plus a spread that shrinks for larger lines.
Risks are similar to margin. If your collateral falls, the lender can issue a maintenance call requiring cash or more collateral, often within a few days, and can sell your securities if you do not meet it. Lenders can also change advance rates or reduce your line. Selling to meet a call can realize taxable gains at a bad time. Each lender’s terms differ; read the agreement.
In scenarios, you can model an SBLOC with its rate, advance rate and call threshold, draw on it instead of selling assets, and see how LTV evolves and whether a historical-style drop would trigger a call.
Example
You pledge a $1,000,000 diversified stock portfolio. Assume (illustrative terms) a 60% advance rate and a call if LTV rises above 70%.
- Credit available: $1,000,000 × 60% = $600,000
- You draw $400,000 to bridge a home purchase at 6.5%: interest = $26,000 a year
- Starting LTV: 40%
- Call triggered when collateral falls below $400,000 ÷ 0.70 = $571,429, a 42.9% decline
A 70% LTV ceiling is equivalent to a 30% equity maintenance requirement. If you had drawn the full $600,000, the call line would be $857,143, only a 14.3% drop.