Asset-Backed Finance: Borrow Against What You Own, Keep What Matters

What Is Asset-Backed Finance?

Asset-backed finance is a broad term for any lending arrangement where the borrower pledges an asset they own as security for a loan. Instead of relying primarily on your income or credit score, the lender looks at the value of your collateral — whether that is a property, an investment portfolio, a Patek Philippe watch, or a stack of unpaid invoices.

The core appeal is straightforward: you need cash, but you do not want to sell. Perhaps selling would trigger a large Capital Gains Tax bill. Perhaps the asset has sentimental value. Perhaps you simply expect it to appreciate and want to hold on. Whatever the reason, asset-backed finance lets you unlock liquidity from your existing wealth without a taxable disposal.

This type of lending has been common among high-net-worth individuals and businesses for decades, but it is becoming increasingly accessible. From mainstream banks offering Lombard facilities to specialist lenders who will advance cash against a Rolex Daytona in 24 hours, the market has grown significantly.

How Asset-Backed Finance Works

The mechanics are similar across most forms of asset-backed lending, though the details vary depending on the collateral type.

Collateral types. Almost any asset with a verifiable, relatively stable value can serve as collateral. The most common categories include listed securities (equities, bonds, funds), residential and commercial property, luxury goods (watches, jewellery, fine art, classic cars, wine), invoices and trade receivables, and plant and machinery.

Loan-to-value ratios (LTV). The amount you can borrow is expressed as a percentage of the asset's appraised value. LTV ratios vary widely. A portfolio of blue-chip equities might secure an LTV of 60-80%. Prime residential property typically achieves 65-75% on a bridging loan. Luxury watches and jewellery generally attract 50-70% LTV, and fine art tends to sit at 50-60%.

Typical terms. Loan durations range from a few weeks (for pawnbroking or short-term bridging) to several years for Lombard facilities. Interest can be charged monthly, rolled up to the end of the term, or serviced on a regular schedule. Most asset-backed loans allow early repayment, though some carry exit fees.

Types of Asset-Backed Lending

Lombard Lending (Portfolio-Backed Loans)

Lombard lending allows you to borrow against the value of your investment portfolio — shares, bonds, funds, and sometimes structured products. Your portfolio remains invested and continues to earn returns while serving as collateral. Private banks and wealth managers routinely offer Lombard facilities, typically at interest rates of 2-4% per annum above the base rate. This makes it one of the cheapest forms of asset-backed finance available.

The trade-off is that if your portfolio falls in value, the lender may issue a margin call, requiring you to either top up the collateral or repay part of the loan. Lombard lending suits individuals with diversified, liquid portfolios who need medium-to-long-term access to capital.

Property Bridging Finance

Bridging loans secured against property are designed for speed. They are commonly used to fund property purchases before a sale completes, to finance renovations, or to release equity quickly from an existing property. Rates typically sit between 0.4% and 1.5% per month, with terms of 3 to 18 months. The loan is usually repaid when the underlying property is sold or refinanced onto a conventional mortgage.

Luxury Asset Lending

This is the modern evolution of pawnbroking — but aimed at higher-value items. Specialist lenders will advance cash against luxury watches (Rolex, Patek Philippe, Audemars Piguet), fine jewellery, diamonds, fine art, classic cars, and even wine collections. The process is fast: bring in your asset, get a valuation, and walk out with cash — sometimes on the same day. Read our dedicated guide to luxury asset finance for a deeper look at this option.

Invoice Finance and Trade Finance

For businesses, invoice finance (also called factoring or invoice discounting) lets you borrow against the value of outstanding invoices. Instead of waiting 30, 60, or 90 days for your customers to pay, you receive up to 90% of the invoice value upfront from the finance provider. Trade finance works on a similar principle but covers the cost of goods in transit. These tools are essential for businesses with strong sales but slow cash collection cycles.

Who Uses Asset-Backed Finance?

You might assume this is only relevant to the ultra-wealthy, but asset-backed finance serves a surprisingly wide range of people and situations.

Business owners needing working capital. A company director with significant assets but variable cash flow might use a Lombard loan against their portfolio, or invoice finance against receivables, to smooth out the peaks and troughs of business income.

Individuals facing large tax bills. Self-assessment tax bills, Capital Gains Tax charges on property disposals, or unexpected tax liabilities can demand six- or seven-figure sums at short notice. Borrowing against assets can be a more tax-efficient way to fund these payments than selling investments. If this applies to you, our guide on how to pay a tax bill covers your options in detail.

Estate executors needing IHT funds. When someone passes away, the inheritance tax bill often needs to be paid before probate is granted — but the assets of the estate may be illiquid. Executors can use asset-backed finance to pay HMRC within the six-month deadline while the estate is being settled. Our inheritance tax guide explains this in more detail.

Cash-poor, asset-rich individuals. If your wealth is tied up in property, investments, or valuable possessions, you might be cash-poor but asset-rich. Asset-backed finance is specifically designed for your situation.

Asset-Backed Finance vs Selling Your Assets

The obvious alternative to borrowing against your assets is simply selling them. So when does borrowing make more sense?

Borrowing tends to be the better choice when you expect the asset to appreciate, when selling would trigger a disproportionate tax charge, when you need cash temporarily rather than permanently, or when speed matters. Selling makes more sense when you no longer want the asset, when the borrowing cost would exceed the asset's expected growth, or when you want to eliminate risk entirely. We explore real-world scenarios in detail in our borrow vs sell analysis.

The Process: From Application to Funding

While the exact steps vary by lender and asset type, most asset-backed finance applications follow a similar path.

1. Initial enquiry. You contact the lender (or a broker — we can help you find the right one) and describe what you want to borrow, the asset you are offering as security, and the timeline.
2. Valuation. The lender arranges for the asset to be valued. For investment portfolios, this is simply a review of your current holdings. For property, a surveyor will visit. For luxury goods, an in-house specialist or independent valuer assesses the item.
3. Offer. Based on the valuation, the lender makes a formal offer setting out the loan amount, LTV ratio, interest rate, term, and any fees.
4. Legal and compliance checks. Depending on the type of lending, this may include credit checks, identity verification, source-of-funds checks, and legal documentation.
5. Completion and funding. Once you accept the terms and the legalities are complete, the asset is either pledged (it remains with you but the lender has a charge over it) or physically transferred to the lender (common with luxury goods). Funds are then released — sometimes the same day, sometimes within a few weeks.
6. Repayment. You repay the loan according to the agreed schedule. Once the loan is fully repaid, the charge is released and any physically held items are returned to you.

Costs and Interest Rates

Cost is where the different types of asset-backed finance diverge most significantly. Here is a realistic overview of what you can expect.

Lombard lending: Typically 2-4% per annum above the Bank of England base rate. With the base rate at 4.5% as of early 2026, that translates to roughly 6.5-8.5% per annum. Arrangement fees of 0.5-1% are common. This is the cheapest form of asset-backed finance for most borrowers.

Property bridging: Monthly rates of 0.4-1.5%, equating to roughly 5-18% per annum. Arrangement fees of 1-2% of the loan amount are standard, plus legal and valuation fees. Exit fees may also apply.

Luxury asset lending (pawnbroking): Monthly rates of 1-7% depending on the lender, the asset, and the loan size. Higher-value loans from specialist lenders tend to attract lower rates. A loan of over 100,000 against a watch collection might cost 2-3% per month, while a smaller advance against a single item could be 5-7%.

Invoice finance: Service charges of 0.5-3% of turnover, plus a discount charge (similar to interest) of 1-3% above base rate on drawn funds. Costs depend heavily on volume and the creditworthiness of your customers.

Risks to Understand

Asset-backed finance is a powerful tool, but it is not without risk. Being honest about the downsides is important.

You could lose your asset. If you cannot repay the loan, the lender will realise the collateral. With pawnbroking, this means forfeiting the item. With property bridging, it could mean repossession and forced sale. Make sure you have a realistic repayment plan before you borrow.

Margin calls on portfolio-backed loans. If the value of your investment portfolio falls, the lender may require you to provide additional collateral or repay part of the loan at short notice. In a market downturn, this can force you to sell investments at precisely the worst time.

Interest can accumulate. With rolled-up interest (common on bridging loans and pawnbroking), the total cost can escalate quickly if you hold the loan longer than planned. Always model the total cost of the loan over the full term, including a buffer for delays.

Costs may outweigh benefits. If the interest rate on the loan exceeds the expected return on your asset, borrowing is mathematically worse than selling. Run the numbers carefully — or ask an advisor to help you compare.