For many high-net-worth families, the true power of wealth lies not just in what they own, but in how they use it. At Vardhan Wealth Management, we help clients leverage their resources with precision, keeping both opportunity and risk in balance.
By borrowing against their investment portfolios, clients can unlock liquidity, create new opportunities, and manage cash flow—without disrupting long-term growth or triggering unnecessary taxes.
Why Borrow Against a Portfolio?
As the adage says, “money makes money.” For many clients, this means using their portfolios as leverage rather than liquidating investments. Using an after-tax portfolio as collateral, clients can fund acquisitions, invest in real estate, or pursue other ventures while keeping their core investments intact.
There are several advantages to this strategy including
- avoidance of capital gains and associated taxes,
- continued growth of one’s investment portfolio,
- and in some cases, interest deduction on the loan.
Clients can also use borrowing to streamline inconsistent cash flow. Business owners and executives, for example, may receive steady income throughout the year alongside larger quarterly or annual distributions. Creating liquidity through a portfolio line provides cash flow as needed, which can be repaid later with bonus income or business distributions—all while keeping the portfolio invested.
Borrowing against an investment portfolio can also serve as a valuable tax planning tool. Clients may use the funds to cover quarterly or year-end tax payments, then settle the line when distributions or profits are received. This approach prevents unnecessary sales and resulting capital gains.
Some clients may use portfolio-backed lending to provide capital for their children to fund large purchases such as a home or tuition, again without liquidating their own investments.
Margin Loans vs. Securities-Backed Loans
Portfolio lending generally falls into two categories: margin loans and securities-backed loans.
- Securities-Backed Loans: These allow clients to aggregate assets across multiple entities into one loan facility. By consolidating, clients often have access to higher borrowing limits and lower rates.
- Margin Loans: Margin accounts carry higher interest rates and limit borrowing to a single entity. These are commonly used to purchase additional equities, but at Vardhan, we rarely use them this way; instead, we typically use them to extend a loan to a client at a competitive interest rate.
Strategic Applications in Practice
We’ve helped clients achieve remarkable outcomes with portfolio-backed borrowing:
- One client borrowed against his portfolio at a fixed rate of 2.25%. With the capital, he purchased three businesses, each generating recurring revenue well above his borrowing costs. When rates climbed to 7–8%, this client still enjoyed the 2.25% rate, ultimately paying off the debt in full with his new business income.
- In 2021, during a period of historically low rates, we helped several clients secure favorable lending facilities, enabling them to purchase homes, vacation properties, and commercial real estate.
- In another case, a client borrowed against their portfolio to act as “the bank” for their child’s home purchase. Providing a cash offer up front enabled their child to close quickly in a competitive market and put traditional debt in place afterward.
These are just a few examples that highlight how portfolio lending can turn static assets into tools for growth, opportunity, and multigenerational support.
ManagIng the Risks
Every lending strategy carries risk. If markets decline and portfolios lose value, clients who are over-leveraged could face margin calls, which occur when the lender requires additional funds or collateral to rebalance the account. At Vardhan, we mitigate that risk by enforcing prudent limits even more conservative than the lender allows. For example, we advise clients to access no more than 80% of their full borrowing capacity. This buffer provides room for volatility and reduces the chance of forced liquidations.
Our goal is to actively manage risk so clients can focus on what’s important to them. We monitor every loan with detailed “heat charts,” alert clients early if their facility approaches risk thresholds, and when appropriate, advise paying down lines proactively.
Who should leverage portfolio-backed lending?
While most high-net-worth investors can benefit from portfolio lending, it tends to be particularly valuable for business owners, from physicians and dentists to entrepreneurs running privately held companies. These clients generally have more uneven cash flow alongside significant expenses, and portfolio lending provides flexibility and efficiency to help them achieve their goals.
At Vardhan, we proactively establish lending facilities for every new client by providing financial flexibility should a pressing need arise. Doing so carries no cost, as interest accrues only when funds are used.
turning wealth into opportunity
Whether funding a business acquisition, supplementing cash flow, covering a tax bill, or supporting the next generation, portfolio lending can help high-net-worth individuals and families access liquidity without disrupting their long-term strategies. At Vardhan Wealth Management, this is just one of the many ways we help clients unlock opportunities while preserving and growing wealth.