Borrowing against your portfolio, rather than from it, helps avoid the risk of incurring capital gains tax, disturbing your strategic asset allocation or selling out of the market at the wrong time.
If you need to make a college tuition payment, pay a big tax bill, or jump on a time sensitive business opportunity, your first impulse might be to write a check or to sell investments to raise cash. The former could put your short-term liquidity flexibility at risk and the latter may throw your long-term investment strategy off course.
A way to avoid either situation is to borrow the money you need against the value of your portfolio. That’s the idea behind securities-based lending, whereby investors take out a line of credit using their investments as collateral. This type of borrowing is often faster and more cost-effective than other alternatives.
A borrowing tool with unique benefits
What differentiates our securities-based lending product – the Quick Link Portfolio (QLP) line of credit – from other credit products is its combination of flexibility, versatility and convenience.
The application and approval process for the QLP line of credit is easy and quick compared to traditional loans, and requires minimal documentation or paperwork. Interest rates are competitive and there are no set-up costs. Once the line of credit is in place, you can use it as demands for cash arise — or not use it all, but take comfort in knowing it’s there in case you need it.
Perhaps the most compelling benefit of this line of credit is that it puts an additional source of liquidity at your disposal while keeping your investments intact.
A better way to meet business expenses
If you own a business, a QLP line of credit can provide a more efficient way to manage day-to-day expenses, like payroll and overhead, purchase inventory and maintain cash flow. You could also use it for longer-term business needs, such as real estate acquisitions or business expansions.
There is no maturity date or fixed repayment schedule: if you carry a balance, you will be invoiced interest monthly, but you have the option of repaying some or all of the outstanding principal at any time. As a result, you have greater flexibility than a term loan would afford.
There's no charge to set up and maintain a QLP line of credit. However, since your investment account collateralizes the line of credit, you may be subject to margin call if the value of your securities falls below required minimums. It’s important to consult your Banking Advisor about this borrowing strategy to make sure it is right for you.
Quick Link Portfolio Line of Credit Features
- Collateral assets must be held in a PNC Private Bank℠ Investment Management or Custody Account, or at the discretion of the borrower, in a PNC Investments account. Irrevocable Trusts are not eligible.
- The QLP is a non-expiring, cancellable note with annual reviews.
- The minimum line size is $100,000 and the maximum line size is up to $20 million, depending on the types and concentrations of securities in your portfolio.
- Repayment is interest only, invoiced monthly.
- Approval requires a review of your credit report and FICO credit score, and validation of the fair market value of your eligible assets.
- Funds may be used for a wide range of purposes – but not to purchase investment securities or repay margin debt.
For more information, please consult your PNC Advisor or contact PNC Private Bank.