Skip to main content

Check out our 2Q2021 Investment Update Video + Blog!

NLG Blog Placeholder

Liquidity Without Liquidation – How to use Security-Based Lending

Photo of author, Nicole Gabriel, CFP®.
Nicole Gabriel, CFP®
Financial Strategist

Picture it – It’s April 10th, and your tax bill is due in 5 days. Your emergency fund has been stretched by increased college costs, a broken furnace, or any number of unexpected expenses. Taking funds from your Individual Retirement Account (IRA) is not feasible without a significant penalty. Your brokerage account is fully invested and selling assets to pay a tax bill will create capital gains taxes for the next year. What can you do?

A Securities-Based Line of Credit (SBLOC) can give you much needed liquidity without liquidating your investments.

An SBLOC allows investors to use their non-qualified investment account(s) as collateral for a line of credit. The proceeds from the line of credit can be used for a variety of short- or long-term needs ranging from a short-term bridge loan or income taxes, to real estate acquisitions or new business ventures.

SBLOC Advantages

There are a variety of advantages to utilizing an SBLOC for liquidity. Your current investment strategies and objectives can continue without interruption is a major advantage, and your advisor will continue to have access to the accounts for trading and reporting purposes. Another advantage includes the ability to access competitive rates (fixed or variable). McKinley Carter Wealth Services has built strong relationships with a variety of partner lenders with quick electronic application processes and funding.

With these already established partnerships, McKinley Carter can offer personalized service to our clients and offer a variety of solutions tailored to our clients’ liquidity needs. A Security-Based Line of Credit with McKinley Carter’s partners can typically borrow 50 - 60% of the account value while only paying interest monthly through a linked checking account. There are also no prepayment penalties with these partners, and no fee while your line of credit remains unused.

SBLOC Risks

While there are many advantages to SBLOCs, there are also risks. When the markets perform poorly, the market value of the assets in the account may decrease in value which causes the value of the collateral to decrease. Depending on the outstanding value of the SBLOC being used, the lender may request additional assets to be added to the collateral account, or call the collateral and force liquidation of the assets at what may be a very low price.


If you have additional questions about Securities-Based Lines of Credit and if it is appropriate for your situation, please reach out to your McKinley Carter Advisory Team or call 866-306-2400.

Related Insights
I Stock 1199587565 Life Plan TCP blog

Are You Getting the Best Return on Life?

When it comes to investing, the current standard of return on investment (ROI) can be self-limiting, adding pressure that is counterproductive. So much of ROI is not within our control. It’s important to balance return on investments with return on life (ROL). Return on life is defined as, "How well you are doing in living the life you want, with the money you have.”

Read More
I Stock 858276820 THIEF SAT blog final

Comparison Is the Thief of Joy

Mastering your wealth isn’t about beating someone else’s returns. It’s important to recognize that no two financial strategies are alike. Another person’s financial plan is likely (and should be) built around completely different goals and objectives, and completely different risk tolerances and acceptance of volatility. Your financial plan should focus on whether you are able to achieve your needs, wants, and wishes. Learn more.

Read More
I Stock 1257889974 JAB Blog Inheritance USETHISONE

3 Steps to Help You Make Better Decisions about Financial Gifts, Inheritances

Have you received a significant financial gift or inheritance but don't know how to spend it wisely? Consider these three steps to help you make the best decision for your unique financial situation.

Read More
Play