What is a Portfolio Loan for Small Business?

What if you could access your stocks, bonds, or mutual funds – without selling them – to borrow money to start a business? You don’t have to wonder any longer: you can. Portfolio loans are a fast and flexible option that leverage your stocks, bonds and other eligible securities. With portfolio loans, you can use up to 80 percent of the value of your portfolio without having to liquidate your holdings.

Also sometimes referred to as a stock loan or securities-based lending, this type of financing works like a revolving line of credit, allowing you to finance your business or franchise by borrowing (and repaying) at will. This means you don’t have to resort to selling your stocks to finance your dream business. By leveraging your assets rather than liquidating them, you can gain access to fast funding with low interest rates – a winning combination.

Portfolio Loans: Digging into the Details

With portfolio loans, you need to have at least $85,000 in stocks before you can tap into the value of your assets to invest in your venture. You can use this revolving line of credit wherever and whenever you need it – there are no spending restrictions. Of course, the more your securities are worth, the more you’ll be able to borrow. David Nilssen, CEO of Guidant Financial, adds, “When most people think about small business financing, the SBA or Rollovers for Business Start-ups (ROBS) might be the first thing to come to mind. But we’re seeing more and more people leverage their non-retirement assets to a buy a business.”

What are the Benefits of Portfolio Loans?

Now that you know what a portfolio loan is, you’re probably curious to hear more about the pros of picking this type of financing. You’ll be pleased to hear that most portfolio loans close within days (not weeks) and boast interest rates that are lower than what you’ll find with many other forms of business financing. Plus, the one-time cost of setting up the loan can be included in the total loan amount, so you won’t have to pay any money out-of-pocket.

Interested in a portfolio loan? Want to know what other funding methods might work for you? See what you pre-qualify for in under five minutes.

Top 5 Benefits of Portfolio Loans

  1. Maintain the Value of Your Portfolio
    Because you’re borrowing against the assets in your portfolio rather than liquidating, your investment portfolio will continue to grow in value.
  2. Low Interest Rates
    Portfolio loans have interest rates as low as 3 to 4 percent. Unlike most loans, you don’t incur interest unless you use the funds, so you’re not penalized if you borrow more than you need.
  3. No Upfront Costs
    You can generally get a stock loan for small business for a low flat rate. That fee can be drawn from your total loan amount, so you don’t have to pay anything out-of-pocket.
  4. Quick Turnaround
    Stock loans close in an average of 10 days. If you enlist the help of a company specializing in portfolio loans, you can usually obtain one quickly and easily.
  5. Combine With Other Financing Methods
    Portfolio loans can also be used in combination with other methods of small business financing including 401(k) rollovers, SBA loans, and unsecured loans, to help you attain your total funding objective for your business or franchise.

How Do I Know if Portfolio Loans are Right for Me?

If the benefits sound impressive but you’re still not sure this is the right financing method for you, ask yourself a few questions to help determine your needs:

Do I want to finance my small business with debt or equity? In other words, are you comfortable taking on a new business loan or would you rather use savings or investments you already own to make the purchase? Debt needs to be repaid over time and will cost you interest. Eligibility and terms for debt financing also depend on your credit score. Meanwhile, equity financing usually doesn’t need to be repaid and the funds may come from outside investors or your own capital (stocks, retirement savings, investment portfolios, etc). Using equity as business financing doesn’t depend on your credit score.

Is the cost of capital as low as it could be? When researching small business funding, do your due diligence and look at several options before you make your final choice. For example, if you’re thinking about refinancing your home to take out capital, did you know leveraging your stocks and money market funds would save you money in interest and monthly payments?

What is my timeline or target opening date? Different business funding methods require varying amounts of time. Approval for an SBA loan could take up to four months, while getting funds from an unsecured loan may only take three weeks. Try planning ahead to determine your ideal opening date, and work backward to figure out which financing option fits best in that timeline.

How will I use the proceeds? Some business funding solutions are better suited for certain expenses than others. Be sure that what you plan to use the capital for is acceptable and fits within any parameters set forth by the lender.

Fast, Flexible Financing at Your Fingers

For many entrepreneurs, portfolio loans offer a quick, flexible, and low-cost form of small business financing to get you up and running or give you a much-needed financial boost to generate profits. Even if you’re not sure about using a portfolio loan as your sole method of funding, it could still be a smart option when combined with other types of small business financing such as 401(k) business financing (also known as Rollovers for Business Start-ups or ROBS). Guidant Financial can help you pre-qualify now for a small business stock loan. Don’t wait – let your investments help finance your dream business.

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Download the Guide

Download the Complete Guide to 401(k) Business Financing – you can save it for later or print it at your leisure.

Download the Guide

Download the Complete Guide to 401(k) Business Financing – you can save it for later or print it at your leisure.

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