The Securities-Backed Line of Credit (SBLOC) provides liquidity that can be deployed for a variety of reasons. We first visited this topic in an article in 2021, which reviewed some advantages and risks associated with this type of financial instrument.
This week, let’s explore some of the practical ways business owners use an SBLOC. Although interest rates have increased over the last twelve months, SBLOCs can still help provide a solution for liquidity needs.
Grow Your Current Business – For business owners wanting to expand, an SBLOC can provide funds to order more inventory, hire staff, or magnify other operational opportunities.
Finance a Side Business – Business owners are by nature entrepreneurs interested in fully utilizing their resources by having many “irons in the fire.” If presented with an opportunity to invest in or own an exciting new business, the SBLOC allows them to borrow funds backed by securities in their brokerage account and remain invested in the market at the same time.
Debt Re-finance or Consolidation – Funds from an SBLOC can be used to help consolidate debt or re-finance higher interest rate loans. Current debt analysis would provide answers as to whether this solution would be profitable, but understanding the details and risks are necessary to determine practicality.
Investment After Sale of Business – For many owners, the question “What comes next?” is often asked before/once their business is sold. There are countless ways to spend/invest the proceeds that come from a successful exit. Owners should understand the leverage an SBLOC provides when deciding on how to finance their next venture.
We’re happy to help examine SBLOC strategies for those looking to navigate liquidity needs.
Matt and Andrew