Banking 101 -

What is Lombard Lending?  

At Arbuthnot Latham, we provide a wide variety of lending arrangements to meet our private banking clients’ needs and circumstances, one of these is Lombard Lending facilities.

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At Arbuthnot Latham, we provide a wide variety of lending arrangements to meet our private banking clients’ needs and circumstances, one of these is Lombard Lending facilities.

A Lombard Lending facility is a loan that enables individuals to borrow against investments, rather than liquidate assets to give access to capital.

Very often, withdrawing from an investment portfolio can incur capital gains tax, so it can be more tax efficient to borrow against investment assets and repay it over time. In general, investing should be considered over the long term. At Arbuthnot Latham, our investment management team suggests at least five years when committing capital.

Also, it is not always the most appropriate option to liquidate investments prematurely as this might coincide with falls in the value of investment assets.

If appropriate for the client’s circumstances, the bank will typically lend up to a percentage of an investment portfolio’s market value. The lending value percentage depends upon the type of assets held and level of risk involved. Typically, a bank will lend up to 60% of the total value of the investment portfolio.

A Lombard Lending facility can give the client quicker and relatively more cost-effective access to capital relative to other available options.

Not all investment portfolios are acceptable as security, however, in the right circumstances and with the bank’s approval, clients of Arbuthnot Latham might be able to borrow against their investment assets. This means the entire process is managed under one roof, creating a more seamless experience. The cost to arrange such a facility can be low with an arrangement fee from 0.5% and the borrowing margin from 1% over base rate, dependent on client’s circumstances and credit status.

Typical use case 

A client wanted to borrow £500k to gift to their daughter to assist with starting a new business.

Rather than liquidating a well-established portfolio, a Lombard Lending facility was arranged.

The facility fell well within the loan to value margins at only 25% of the overall portfolio. A 5-five-year term was agreed with repayment from the sale of other assets the client held.

The arrangement costs were 0.5% with interest charged at 1.5% above base rate (with a minimum base rate of 1%).

The client was not only able to assist their daughter quickly, but it left their investment portfolio intact and allowed the repayment to be made in an orderly manner.

 

Further reading

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Which is the best business deposit account for your business? Find out how structuring your finances can deliver greater financial reward with Arbuthnot Latham.

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Cash deposits for commercial banking clients

We offer a range of cash deposit and fixed term deposit solutions for professional services individuals and businesses. Our specialist bankers can help by understanding the complexities of your business.

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Author -

Phil Lock

Phil Lock

Senior Private Banker

Phil Lock is a Senior Private Banker serving clients across the South West. He has 30 years’ experience in financial services and has worked at Arbuthnot Latham for three years.

DISCLAIMER

This document should be considered a marketing communication for the purposes of the Financial Conduct Authority rules. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is not subject to any prohibition on dealing ahead of the dissemination of investment research. It is for information purposes only and does not constitute advice, a solicitation, recommendation or an offer to buy or sell any security or other investment or banking product or service. You should seek professional advice before making any investment decision. The value of investments and the income from them can fall and rise, and you could get back less than you invest. Past performance is not a reliable indicator of future results. Investment returns may increase or decrease as a result of currency fluctuations.

The contents of this document are based on opinions or conditions as at the date of writing and may change without notice. To the extent permitted by law or regulation, no warranty of accuracy or completeness of this information is given and no liability is accepted for its use or reliance on it.