When most of your net worth sits in one company's shares, borrowing against it works differently from borrowing against a diversified account. Lenders charge more for it, and some refuse it outright.
Why this costs less than a bank
A concentrated position usually arrives honestly. You built the company, or you joined early and held, or the shares came as compensation you never got around to selling. Whatever the reason, a single holding now stands in for a large share of your net worth, and every decision about it carries more weight than an ordinary portfolio decision would.
That is true of selling, and it is equally true of borrowing against it. The two are connected, because the reason to borrow is usually the reason you have not sold.
A diversified portfolio is a collection of small bets. A concentrated position is one bet, and its return is decided by one company's management, one industry and one set of risks. If the company has a bad decade, your net worth has a bad decade. That is the whole argument for diversifying, and it is a sound one.
The complication is that the position has probably grown a great deal, which means selling it means realizing a great deal.
Suppose the position has a low cost basis. Selling half of it produces a taxable gain, and long-term capital gains are taxed at 0%, 15% or 20% depending on your income, with a possible 3.8% surtax above certain thresholds. State income tax may apply as well.
So you face a choice between two outcomes you do not like. Hold and stay exposed to one company. Sell and hand over a substantial slice of a gain you took years to build.
Most people resolve this by doing nothing, which is itself a decision, and often the most expensive of the three.
This is the part that surprises holders. A securities-based lender applies a loan-to-value limit to collateral, and the limit is expressed as the percentage of a position they will lend against. For a broad index fund that limit might sit near 50%. For a single, volatile stock it can fall to a fraction of that, and lenders publish a schedule of exactly which stocks they will accept.
Several practical consequences follow.
Ask a lender for one number before anything else: what loan-to-value will you apply to this specific ticker.
The short version. A concentrated position is the hardest kind of collateral to borrow against, which is why the structure of the financing matters more here than the quoted rate does.
A securities-based line or a margin loan uses the position as collateral and leaves it in place. A covered call programme sells upside in exchange for income, which helps if you are patient about the shares but does not produce a lump sum. A box trade borrows against the account while the financing itself is built on index options rather than on your stock.
That last point is worth understanding properly, because it is easy to misread. The three borrowing structures are compared in our guide to lines of credit, margin and fixed-maturity financing.
A box trade is four S&P 500 index option positions at two strike prices with one expiration. Together they cancel any directional bet and produce a known value on a known date. Selling the structure raises cash today against a fixed repayment later. The financing cost is set by the index options market, not by a lender's schedule of approved stocks.
Two things follow, and it is important to keep them separate.
What it solves is the classification problem. The financing does not depend on your stock having a favorable lending category, and there is no approved list to qualify for, because the position is built on the index rather than on your shares. There is also no scheduled payment during the term, so nothing is drawn from your account while the loan is open.
What it does not do is diversify anything. Your concentrated stock is still concentrated, and the account holding the box still carries a margin requirement against it. If the stock falls sharply, that requirement bites exactly as it would with any other borrowing. A box trade changes how the money is raised. It does not diversify the portfolio, and it does not remove the risk that one company decides your net worth.
Anyone who tells you otherwise is selling rather than explaining.
Side by side
Illustrative. Every route depends on your holding, your basis and your timeline.
An exchange fund accepts your shares and gives you a stake in a pooled, diversified vehicle. It can defer the gain rather than realizing it, which is genuinely useful. The trade is time: these funds typically require a commitment measured in years, they charge a fee, and your money is not liquid while it is in there.
Charitable structures work well if you were going to give anyway. A donor-advised fund takes the shares, avoids the capital gain, and gives you a deduction. That is excellent planning for the portion you intend to give away, and no help at all for the portion you need in cash.
Prepaid variable forwards and similar bank structures let you monetize part of a position with some downside protection and some capped upside. They are usually designed for very large positions, and they carry their own costs and documentation.
None of these is wrong. They answer different questions, and most holders end up using more than one.
Interest on a margin loan or a portfolio line is traced to what the money paid for, so where the borrowing funds a personal expense it is generally not deductible.
A box trade is treated differently. Index options are Section 1256 contracts, and for the 2026 tax year the financing cost is marked to market annually, so that cost is generally recognized as a capital loss at 60% long-term and 40% short-term. That loss offsets realized capital gains without a cap, and up to $3,000 a year against ordinary income.
Read that next to the problem at the top of this page. When you do eventually diversify, you realize gains. A capital loss has something to work against in a year like that. InvestedFlex does not provide tax advice, and those figures are statutory descriptions rather than a projection of your outcome. Your own adviser should confirm how it applies to you.
If the concentration is the reason you cannot sleep, sell. Borrowing against a position you are frightened of converts a worry into a debt.
If the company's prospects have genuinely changed, sell. Tax is a cost, and it is rarely the largest one available.
If you need the money permanently rather than for a defined period, selling is cleaner than a structure with a maturity date you will have to meet or roll.
Borrowing fits a narrow but real case: you want to keep the shares, you need cash for a defined period, and you would rather pay a known cost than realize a gain you have spent years deferring.
A private review compares the paths for your specific holdings, amount and timeline. Indicative pricing, dated.