SBLOC: Accessing Cash Without Selling Assets
Tax Tips / Liquidity Mgmt
SBLOC: Accessing Cash Without Selling Assets
๐ก Executive Summary
- Problem: You need $2M cash for a real estate down payment or tax bill. You have $10M in stocks, but selling them triggers a 23.8% Capital Gains Tax ($476k loss).
- Solution: Open a Securities-Backed Line of Credit (SBLOC). You pledge your portfolio as collateral and borrow the cash.
- Result: Borrowing is not a taxable event. You get the $2M tax-free, keep your stocks invested (growing), and pay interest only.
โ ๏ธ THE MAINTENANCE CALL (MARGIN CALL)
Leverage cuts both ways. If the market crashes and your portfolio value drops below a certain threshold (e.g., 50-70%), the bank will force-sell your assets at the bottom to cover the loan. You must maintain a healthy “buffer” (borrow only 20-30% of value) to survive volatility.
Leverage cuts both ways. If the market crashes and your portfolio value drops below a certain threshold (e.g., 50-70%), the bank will force-sell your assets at the bottom to cover the loan. You must maintain a healthy “buffer” (borrow only 20-30% of value) to survive volatility.
For the Ultra-HNW, debt is not a burden; it is a tool. SBLOC is the “Credit Card” of the wealthy. Unlike a mortgage (weeks to approve) or selling stock (taxable), an SBLOC provides liquidity in 24-48 hours with zero tax friction. This is the mechanical engine behind the “Buy, Borrow, Die” philosophy.
๐ง Core Mechanic: Non-Purpose Lending
SBLOC is distinct from “Margin.” You cannot use SBLOC proceeds to buy more stock (that’s Reg T Margin). You must use it for “Non-Purpose” needs: Real Estate, Business Investment, Taxes, or Luxury Goods. This restriction allows for better rates and higher loan-to-value limits.
SBLOC is distinct from “Margin.” You cannot use SBLOC proceeds to buy more stock (that’s Reg T Margin). You must use it for “Non-Purpose” needs: Real Estate, Business Investment, Taxes, or Luxury Goods. This restriction allows for better rates and higher loan-to-value limits.
Performance Simulation: The Cost of Cash ($1M Need)
Net Cost to Access $1M
Sell Stock (Trigger Tax)
~$300k+ Tax Bill Immediately
Capital Destroyed
Borrow SBLOC (5% Interest)
$50k/yr Interest (Tax Deductible*)
Capital Preserved
SBLOC vs. Margin Loan vs. Mortgage
| Feature | Standard Margin | SBLOC (This Strategy) | Mortgage / HELOC |
|---|---|---|---|
| Usage | Buy More Stock | Buy Anything (Real Estate) | Real Estate Only |
| Speed | Instant | 24-48 Hours | 30-60 Days |
| Repayment | Open-ended | Interest Only (Monthly) | Principal + Interest |
“True wealth is not just having money; it is having access to liquidity without triggering a taxable event. The SBLOC converts your balance sheet into a checking account.”
๐ Related BMT Playbooks (Internal)
๐ก๏ธ The Logic: Premium Financing is essentially an SBLOC for insurance โ๏ธ The Combo: Use SBLOC on Exchange Fund units (Liquidity on illiquid assets) โ The Use Case: Borrowing via SBLOC to invest in a QOZ๐๏ธ Institutional Resources (External)
๐ Regulator: FINRA Guide to SBLOC Risks ๐๏ธ SEC Alert: Securities-Backed Lines of Credit ๐ Definition: Non-Purpose Loan Explained
BMT designs for tax reality, not theory.