When it comes to accessing significant capital, the ultra-wealthy operate in a completely different financial ecosystem than the average person. While most people are familiar with traditional borrowing methods like mortgages, personal loans, and credit cards, the financial elite use sophisticated strategies to leverage their existing assets for maximum advantage.
Today, I’m going to reveal one of the most powerful yet least discussed methods that millionaires use to borrow money cheaply: single stock lending. This innovative financing approach allows the wealthy to access substantial liquidity without triggering tax events or disrupting long-term investment strategies.
What is Single Stock Lending?
Single stock lending is a specialized financing solution that allows investors to borrow against their individual stock holdings at exceptionally favorable rates. Unlike standard margin loans offered by retail brokerages, single stock lending provides access to significant capital at interest rates that are often dramatically lower than traditional borrowing options.
This financial strategy represents one of the most efficient ways for wealth creation available today, yet surprisingly few investors—even sophisticated ones—are familiar with its potential. Working with specialist lenders who focus on this niche, I’ve helped clients unlock billions in liquidity from their existing stock portfolios.
How Single Stock Lending Works: A Practical Example
Let’s break down how millionaires borrow money cheaply through single stock lending with a practical example:
Imagine you’re a successful entrepreneur holding $10 million in shares of a public company—perhaps from your company’s IPO or accumulated through executive compensation. You want to purchase a luxury property without liquidating your stock position, which would trigger significant capital gains taxes and potentially impact the stock’s market price.
Through single stock lending, you could borrow up to 65% of your stock value—in this case, $6.5 million—at a fixed interest rate as low as 3-4%. The loan is structured as a repo (repurchase agreement), where your shares are transferred to the lender for the duration of the loan term.
Unlike traditional margin loans, which can be called in at any time, these facilities typically have terms of 2-5 years with no early repayment options for either party. This provides exceptional stability and predictability in your financial planning.
The entire transaction is non-recourse, meaning the only collateral is the shares themselves—no personal guarantees or additional security is required. If the stock performs well during the loan period, you retain all the upside appreciation when the shares are returned at maturity.
Why How Millionaires Borrow Money Cheaply Matters
The financial advantages of this approach are substantial:
- Tax Efficiency: By borrowing against shares rather than selling them, you avoid triggering capital gains taxes
- Lower Interest Rates: Fixed rates of 3-4% are significantly below typical wealth management lending rates
- Asset Retention: You maintain economic exposure to your stock position, including all upside potential
- Financial Flexibility: Loan proceeds can be used for any purpose, from property purchases to further investments
- Simplified Structure: Non-recourse lending means your other assets remain unencumbered
This financing approach has facilitated over $4.5 billion in transactions for sophisticated investors who understand how millionaires borrow money cheaply by leveraging their existing assets strategically.
Key Terms of Single Stock Lending
Typical Loan-to-Value (LTV) Ratios
Single stock lending facilities typically offer LTVs between 60-65%, with the potential to reach 70% for highly liquid stocks. This compares favorably with standard margin loans, which often cap at 50% for concentrated positions.
Interest Rates and Loan Durations
One of the most attractive aspects of single stock lending is the competitive fixed interest rates, which typically range from 3-4% depending on the duration of the loan. Terms can extend from 2 years to as long as 5 years, providing stable, predictable financing.
Transaction Fees
Transaction fees generally range between 1-3% of the drawn funds, which is reasonable considering the substantial benefits and specialized nature of these facilities.
Loan Structure
The loan is structured as a repurchase agreement (repo) with the transfer of shares to the lender for the term of the loan. While the lender may trade the position, they are prohibited from lending out the collateral shares or shorting them—providing important protections for the borrower.
The non-recourse nature of these loans represents another key advantage in how millionaires borrow money cheaply. Only the shares themselves serve as collateral, with no personal guarantees or additional security required.
Protecting Your Position: Understanding Margin Calls
The margin call mechanism in single stock lending is more forgiving than traditional margin loans, offering significant downside protection:
- Margin calls are triggered at 80% of the loan-to-value ratio, not the share price
- For example, if you borrow 60% against a $1 million stock position, the margin call level is set at 48 cents per dollar (80% of the 60% LTV)
- If the share price falls below this threshold (calculated on a three-day rolling average), you have two options:
- Top up the position with additional cash or shares
- Terminate the loan while keeping the loan proceeds on a non-recourse basis
This latter option is particularly powerful—it effectively creates a “put option” that allows you to walk away from the position while keeping the borrowed funds if the stock performs poorly.
Handling Corporate Actions
Share-for-Share Takeovers
In the event of a share-for-share takeover, the loan continues to maturity with the takeover shares becoming the new collateral. This provides seamless continuity even during major corporate events.
Cash Takeovers
For all-cash or partial cash/share takeovers, the loan terminates at the takeover price. Any value of the collateral beyond the outstanding loan is returned to the borrower, allowing you to capture the takeover premium.
Loan Sizes and Flexibility of Use
Single stock lending facilities can accommodate a wide range of needs, with loan sizes typically ranging from $250,000 to over $100 million. This makes them suitable for both moderately wealthy individuals and ultra-high-net-worth families or institutions.
The proceeds can be used for virtually any purpose. In my experience working with wealthy clients, the most common uses include:
- Property acquisition – Purchasing luxury real estate without liquidating stock positions
- Portfolio diversification – Acquiring additional investments while maintaining existing positions
- Business ventures – Funding new enterprises or acquisitions
- Lifestyle assets – Purchasing yachts, aircraft, or fine art collections
- Liquidity management – Creating a cash reserve without triggering tax events
Global Availability of Single Stock Lending
This sophisticated borrowing approach is available across major global markets, including:
- United States
- United Kingdom
- European Union
- Switzerland
- Hong Kong
- Singapore
- Australia
- Canada
- Japan
The specific stocks eligible for this type of lending vary by jurisdiction, but generally include large-cap, liquid securities traded on major exchanges.
Why This Strategy Remains Under the Radar
Despite its powerful advantages, single stock lending remains relatively unknown outside the circles of the ultra-wealthy. There are several reasons for this:
- Limited marketing – Specialist lenders typically work through private channels rather than public advertising
- High entry thresholds – Minimum loan sizes often start at $250,000, placing this strategy beyond the reach of most retail investors
- Specialized expertise – The complexity of these arrangements requires sophisticated financial knowledge
- Exclusive networks – Access often depends on relationships with private banks and family offices
Having facilitated numerous single stock lending arrangements, I can attest that understanding how millionaires borrow money cheaply requires both specialized knowledge and access to the right financial networks.
Case Study: Strategic Wealth Preservation
One of my clients, a technology entrepreneur with a significant position in his former company’s stock, faced a common dilemma. His net worth was substantial on paper, but highly concentrated in a single security. Selling would trigger capital gains taxes exceeding 20% and potentially signal lack of confidence in the company he had built.
Through a $12 million single stock lending facility at 3.5% fixed for three years, he was able to:
- Purchase a $7 million property outright
- Invest $3 million in a diversified portfolio
- Maintain a $2 million liquidity reserve
The total cost of capital, including transaction fees, worked out to less than 4.5% annually—dramatically lower than traditional lending options. Most importantly, he retained full economic exposure to his original stock, which appreciated by 35% over the following two years.
This example perfectly illustrates how millionaires borrow money cheaply to enhance their wealth while managing risk and tax exposure.
Is Single Stock Lending Right for You?
While single stock lending can be an exceptionally powerful tool, it’s not suitable for everyone. The ideal candidate typically:
- Holds significant positions in publicly traded securities (minimum $500,000+)
- Desires liquidity without triggering tax events or disrupting existing positions
- Has a clear purpose for the borrowed funds, typically aligned with wealth creation or preservation
- Understands and can manage the associated risks, particularly regarding potential share price volatility
- Has a longer-term horizon (2+ years) for their financing needs
If you meet these criteria, single stock lending could represent an opportunity to significantly optimize your financial strategy.
The Strategic Advantage of Cheap Borrowing
Understanding how millionaires borrow money cheaply provides insight into a fundamental principle of sophisticated wealth management: strategic leverage. The ultra-wealthy rarely liquidate performing assets when they need capital; instead, they borrow against them at favorable rates.
This approach offers multiple advantages:
- Compounding continues – Their investments keep growing while they deploy borrowed capital elsewhere
- Tax efficiency – They avoid triggering capital gains taxes from asset sales
- Wealth multiplication – They can simultaneously maintain existing positions while acquiring new assets
- Inflation hedge – Fixed-rate borrowing provides protection against currency devaluation
- Estate planning – Assets can continue to appreciate outside their taxable estate while generating liquidity
When executed properly with appropriate professional guidance, this strategy can significantly accelerate wealth creation and preservation.
Conclusion: The Secret of How Millionaires Borrow Money Cheaply
Single stock lending represents one of the most powerful yet least understood tools in sophisticated financial planning. By allowing investors to access substantial liquidity at remarkably favorable rates while maintaining their investment positions, it embodies the essence of how millionaires borrow money cheaply to enhance their financial position.
As with any sophisticated financial strategy, professional guidance is essential. The nuances of structuring these facilities correctly, selecting the appropriate lender, and integrating this approach into your broader wealth management strategy require specialized expertise.
If you hold significant stock positions and are looking to optimize your financial strategy, I would be delighted to discuss how this approach might benefit your specific situation.
FAQs About How Millionaires Borrow Money Cheaply
What makes single stock lending different from standard margin loans?
Single stock lending offers fixed terms (typically 2-5 years), lower fixed interest rates (3-4%), higher loan-to-value ratios (up to 65-70%), and non-recourse protection. Standard margin loans usually have variable rates, can be called at any time, offer lower LTVs, and have full recourse to the borrower.
What happens if my stock declines significantly during the loan term?
If your stock falls below the margin call threshold (typically 80% of the LTV ratio), you can either provide additional collateral or, uniquely to this product, simply surrender the shares and keep the loan proceeds with no further obligation.
Can I sell my shares during the loan term?
No, the shares are transferred to the lender for the duration of the loan term. However, you retain all economic benefits, including appreciation and in some cases dividends, depending on the specific arrangement.
What are the minimum stock requirements for this type of lending?
Generally, the stocks need to be publicly traded on major exchanges with sufficient liquidity. Minimum loan sizes typically start at $250,000, implying stock positions of approximately $400,000 or more.
How does the cost compare to selling shares and paying capital gains tax?
For substantial positions with significant embedded gains, single stock lending is often dramatically more cost-effective than selling. For example, a 20% capital gains tax on a highly appreciated position would be a one-time cost far exceeding several years of 3-4% interest payments.
Can I use this strategy with restricted stock or shares subject to insider trading rules?
This varies by jurisdiction and specific circumstances. In some cases, special arrangements can be made for restricted securities, but additional documentation and potential regulatory filings may be required. Always consult with legal advisors regarding securities regulations.
