PRFT Strategies · theprft.com

Borrow Without Selling

An Ancient Practice Refined for Modern Finance

Clarity; Margin; Multiplication.

Abstract

A Securities Backed Line of Credit provides liquidity without liquidation — a modern expression of an ancient principle practiced by the wise for centuries.

From merchants pledging grain to families preserving land, the idea has always been the same: use what you have without losing what you own.

Used wisely, an SBLOC aligns liquidity with stewardship. It delivers cash for opportunity while protecting the structure that created it.

Introduction

At PRFT, we believe modern finance often forgets its oldest wisdom: true wealth is not measured by what you sell, but by what you steward.

For centuries, wise stewards practiced a rhythm: use what you have without losing what you own. Ancient landowners pledged harvests instead of selling fields. Merchants borrowed against stored grain and gold to fund the next voyage. Endowments and family offices carried that same rhythm forward: access liquidity without breaking the foundation that creates it.

Traditional liquidity often means selling. Sales trigger taxes, disrupt allocation, and interrupt compounding. This ancient approach, refined through modern tools, offers another way.

A Securities Backed Line of Credit (SBLOC) reflects that rhythm. It allows you to remain invested while borrowing against strength, converting stability into opportunity without dismantling your structure.

This is not aggressive leverage. It is planned liquidity. A stewardship strategy that aligns ancient wisdom with modern clarity.

Section 1. Concept and Purpose

An SBLOC is a credit facility secured by an investment account. Think of it as a credit line that sits beside your portfolio and activates only when needed.

Eligible securities such as diversified stocks, ETFs, and bonds are pledged as collateral. The lender sets a borrowing limit as a percentage of the portfolio value.

Proceeds are generally non purpose. They are not used to buy more securities. They are intended for real world liquidity such as real estate, business expansion, tax payments, or bridge financing.

In essence: you borrow against your investments, not from them. The assets keep working while you access cash.

Section 2. How SBLOCs Work

An SBLOC operates much like a home equity line of credit, except your portfolio replaces the property as collateral.

It can also be viewed as a modern alternative to cash value life insurance borrowing. Both create liquidity from an existing asset, but there are clear differences.

Transparency: SBLOC terms are clear and external. Policy loans depend on insurer crediting, policy charges, and performance.
Cost: SBLOC rates often track prime or institutional lending. Policy loans can carry higher internal costs and potential reduction of policy benefits.
Flexibility: SBLOC proceeds can be used for many purposes with repayment on your schedule. Policy loans must stay within policy limits and unmanaged balances can erode the death benefit.
Accessibility: SBLOCs can be established quickly through a custodian. Insurance involves underwriting, surrender schedules, and carrier rules.

Once approved, the lender places a lien on the portfolio. You draw up to the limit and pay interest only on what you use. Dividends and growth continue to accrue in the account.

If market values fall significantly, the lender may request additional collateral or a partial paydown. This is a maintenance call. Repayment is flexible. You can pay interest only, amortize, or pay off entirely when cash flow allows.

Typical Lender Requirements

Portfolio held at an approved custodian or brokerage.
Diversified and liquid holdings such as stocks, ETFs, or bonds.
Minimum account size, often as low as $50,000 and up to $250,000.
Advance rates between 50 and 70 percent depending on holdings and lender policy.
Interest typically near the prime rate with no set amortization schedule.

Bottom line: Like cash value life insurance borrowing, an SBLOC provides liquidity without liquidation, with simpler terms and direct control of the assets.

Section 3. Strategic Benefits

Tax efficiency: No sale means no realized capital gain. Compounding continues. Interest may be deductible in certain cases when proceeds are used for business or investment. Consult a tax advisor.

Speed: Funds can be accessed quickly without selling into the market. Useful for closings, deposits, or time bound opportunities.

Continuity: Maintain exposure to your investment strategy rather than exiting and reentering at uncertain prices.

Flexibility: Draw and repay as needed. Treat it as a bridge, not a crutch.

Section 4. Advisor Conversation

When discussing an SBLOC with a financial advisor, focus on alignment with the long term plan and on risk management.

What percentage of my portfolio can safely support a line of credit
How would a 25 percent market drop affect my borrowing capacity
What rate applies today and how is it set over time
If proceeds are used for a business or investment, can interest be deductible
What repayment structure best fits my cash flow plan
How will we monitor the loan to value and set a stop point for additional draws

Your advisor should help model collateral behavior, interest cost, and repayment options under different market scenarios. The goal is liquidity that does not undermine compounding.

Section 5. Risks and Guardrails

Market volatility lowers collateral value and can trigger maintenance calls. Interest expense erodes returns if balances remain for long periods. Over borrowing invites pressure when conditions shift.

Set boundaries in advance. Keep a conservative advance rate. Maintain cash reserves. Use the line only for defined purposes. Review covenants and collateral quarterly.

Stewardship means access without overreach. Let the tool serve the plan, not drive it.

Section 6. Implementation

Begin with conversation and caution.

Ask your advisor which custodians offer competitive SBLOC terms.
Confirm eligible holdings and a conservative borrowing limit.
Start small, borrow less than half of the approved limit.
Document purpose and repayment plan before any draw.
Use a separate account for proceeds to track business or investment use clearly.

Liquidity is a privilege. Used with wisdom, it multiplies what you already have. Used carelessly, it erodes the margin you built.

Conclusion

Borrowing against strength is a timeless practice. The SBLOC brings that practice to personal portfolios in a clear and accessible way.

It preserves allocation, respects taxes, and funds action without dismantling the plan. Inside a PRFT Wealth Plan, it turns compounding into capability and capability into stewardship.

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Disclaimer

The concepts and examples in this article are for educational purposes only. They are provided to illustrate general principles of liquidity, borrowing, and stewardship, not to offer personalized financial, investment, or legal advice.

Numbers & Company LLC and The PRFT are not registered financial advisors, broker-dealers, or insurance agents. We do not sell securities, manage portfolios, or offer individualized recommendations regarding specific investments or credit products.

Before establishing a Securities-Backed Line of Credit (SBLOC), cash-value life insurance policy, or any related financial arrangement, consult a licensed financial advisor, tax professional, or attorney who can evaluate your personal situation, risk tolerance, and objectives.

All financial decisions carry risk. The use of credit or leverage should be considered only within a comprehensive plan designed for long-term sustainability and stewardship.