How to Borrow Against Your Assets to Support a Business Need

November 2, 2022

If your company has the opportunity to expand, increase productivity, or reach a broader customer base, funding shortages should not prevent your business from accomplishing these goals.

When your business needs a creative financing solution to fund growth, one option to consider is using the value of your existing personal assets as collateral. This type of strategic funding allows business owners to strengthen the company and meet immediate needs without assuming large, long-term debts.

Discover how to borrow against your assets to support your business, the benefits of available lending products, and what to expect during the application process.

Using Assets as Funding Collateral

Although some companies try to avoid carrying debt or using a line of credit, these financial instruments may be helpful tools to create the buying power and financial flexibility you might need to grow your business.

For example, a business line of credit might be be a lifeline for your company to continue on a path toward growth without the need to sell assets or commit significant working capital towards business purchases.

Business owners generally have two primary collateral sources to secure a line of credit: fixed assets such as land, buildings, and machinery or value-added assets such as investment portfolios, brokerage accounts, and savings accounts.

Collateral may be used to secure either a commercial Revolving Line of Credit (RLOC) or Securities-Based Line of Credit (SBLOC) for your specific business needs.

Commercial Revolving Line of Credit: By using a fixed asset such as a personal home or business property as collateral, you may qualify for a Revolving Line of Credit (RLOC). This line of credit is similar to a credit card, allowing you to draw from and repay a revolving credit account, typically with a variable interest rate. The typical loan term for a business RLOC is 12 months where borrowers pay interest only, with the principal amount due at maturity.

Securities-Based Business Line of Credit: An SBLOC is a line of credit backed by the value of your investment portfolio, typically at a variable interest rate. With an SBLOC, you may be eligible for more available funding for business use, and these funds can be used as bridge financing. At the same time, you finalize purchases or make other business improvements.

These financing options are particularly attractive to high-net-worth individuals with marketable securities. You can pledge assets from one investment account or pledge diversified holdings to minimize the risk of a decrease in market value. These pledged assets are held in a separate brokerage account and may be used for short-term business needs.

How You Might Benefit by Borrowing Against Your Assets

Business owners may benefit in several significant ways by using personal or business assets as collateral for securing a business line of credit.

Acquire the financial resources needed to pay for growth opportunities such as building improvements, equipment investments, or expanding your workforce.

Access funding without having to sell assets or liquidate investment portfolios, which could trigger larger tax bills for capital gains taxes. *Consult your investment and tax advisors prior to taking any action.

Avoid large-scale loans or long-term debts.

Achieve flexibility to still trade and make changes within investment accounts even while they are used as collateral for SBLOCs.

Potentially earn larger amounts of interest or dividends on investment accounts while paying a smaller interest rate for the line of credit itself. *Of course, all markets and rates are subject to continuous change and can be volatile on both the investment and borrowing side. Consult your investment and tax advisors prior to taking any action.

How to Apply for a Business Line of Credit

If you are considering using the value of your assets to secure a Revolving or Securities-Based Line of Credit, Texas Gulf Bank can help. We offer strategic financial solutions that provide your business with the flexibility, convenience, and freedom to make essential investments back into your business.

Your application process with TGB begins with an initial assessment to discuss funding needs and review all existing financial obligations. We will also examine the company structure, business goals, assets, and current financial strength of the company.

We ask the following of applicants:

Personal loan guarantee from the business owner(s).
Good credit score for both the company and each guarantor, as defined by TGB underwriting guidelines.

In addition, we also require specific documentation to apply for this type of funding, including but not limited to:

3 years of year-end balance sheets and income statements.
3 years of guarantor’s personal and business tax returns and financial statements.
Current Brokerage Statement and/or Statement of Deposits
Current Accounts Receivable (A/R) and Accounts Payable (A/P) aging.
Full list of company assets and inventory.
Contact information for personal finance tax advisor for SBLOCs.
Any other material collateral documentation that may be required.

Once we receive the required documentation, we will expedite the loan review and approval process. As a local, community bank, we make lending decisions in-house, which streamlines the approval process so that you can access funds quickly if approved for the loan.

Contact Us Today for Your Line of Credit Needs

To learn how to borrow against your assets to secure a line of credit, or to speak with a lender, call Texas Gulf Bank at 713-595-7400. You can also use the contact form above to let us know of your interest or visit one of our many local banking centers to receive personal support from one of our expert lenders.

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