Shareholders of listed companies who need liquidity without selling usually meet two proposals first. Their private bank or broker offers a margin line against the portfolio. A specialist lender offers a structured facility secured by a specific block of shares. The two look similar on a term sheet — both advance cash against listed equity — and behave very differently when it matters. The differences turn on five things: recourse, the source of the capital, the documentation, what happens if the price falls, and who actually holds the shares.
1. Recourse
A margin loan is a personal obligation. If the collateral value falls and a sale does not cover the balance, the borrower owes the shortfall, and the lender can pursue other assets. That is what “recourse” means.
A non-recourse structured facility is documented so that the lender’s remedy is limited to the pledged collateral. Silo’s facilities are structured without personal or corporate liability beyond the pledged shares. The clause that says so is the single most important sentence in the documentation, and a reader should insist on seeing it, not a summary of it.
2. Source of capital
Margin lending draws on the bank’s or broker’s balance sheet under standard house terms that the institution can change unilaterally, usually on short notice.
Structured facilities are funded in one of two ways, and the difference is not always visible from the outside. Some providers are intermediaries: they collect the shares, then look for capital. Others are principals: they fund from their own, already-allocated capital. Silo deploys its own capital and prefunds it before the operational release of funds; no securities selling is required for execution. The question to ask any provider is direct: whose name is on the facility agreement, and whose money is it?
3. Documentation
A margin account is opened with a standard client agreement, often dozens of pages long, drafted for the institution’s benefit and rarely negotiated.
A structured facility should be documented transaction by transaction. Silo’s documentation is a Facility Agreement, a Collateral Management Agreement, a Promissory Note and a Closing Statement. Each has a specific job: the Facility Agreement sets the terms; the Collateral Management Agreement governs how the shares are held and controlled through the executing broker-dealer; the Promissory Note evidences the obligation; the Closing Statement confirms the economics before funds are released. The sequence matters as much as the content — see what “prefunded” means and how to verify it.
4. What happens if the share price falls
Under a margin loan, a fall below the maintenance level triggers a margin call: deposit more collateral or cash within a short window, or the lender sells. The sale can happen at the worst moment, and the borrower remains liable for any shortfall.
Under a non-recourse facility, the borrower’s exposure is limited to the collateral already pledged. The documentation should define collateral events and their consequences in advance; the borrower should read those provisions with the same care as the non-recourse clause. Facility terms at Silo are aligned to the liquidity, volatility and collateral quality of the specific shares, which is why parameters differ from one position to another rather than following a house rate card.
5. Who holds the shares
In a margin account the shares sit with the broker, under the broker’s terms, and are commonly available to the broker for its own purposes.
In Silo’s structure, the Facility Agreement and Promissory Note are signed first. The borrower opens an account in their own name at a licensed broker-dealer, and Silo’s capital for the facility is deposited into that account, where the borrower can see it before any shares move. The shares are then deposited into the same account, the broker-dealer activates the collateral parameters under the Collateral Management Agreement, Silo issues the Closing Statement confirming the economics, and on the borrower’s signature the release of funds is instructed immediately. The operational steps are executed by licensed securities firms and broker-dealers, not by Silo itself.
Which is appropriate?
A margin line suits a diversified portfolio, modest leverage, and a borrower comfortable with personal recourse and the possibility of a forced sale. A non-recourse structured facility suits a concentrated position in a single listed company — a founder, a family office, a trust, a beneficial owner — where the objective is liquidity while retaining economic exposure to the shares, and where personal liability beyond the collateral is unacceptable.
Neither is right in every case. Both carry regulatory and disclosure considerations for substantial shareholders, directors and insiders that depend on the exchange and the reader’s own position. Those considerations should be discussed with counsel before any shares move.
How to tell an intermediary from a principal
Three questions separate them quickly. Whose capital funds the facility, and can it be evidenced before shares are transferred? Who signs the facility agreement? Are any fees payable before funding? A principal lender with prefunded capital will have direct answers to all three. The full list is in “Twelve questions to ask any securities-backed lender”.
Frequently asked questions
Is a non-recourse facility the same as a Lombard loan?
No. A Lombard loan is a bank’s portfolio-secured credit line and is generally full-recourse to the borrower. A non-recourse facility limits the lender’s remedy to the pledged collateral.
Do I keep the economic exposure to my shares?
Silo’s facilities are structured to enable liquidity while maintaining full economic exposure under documented collateral mechanics. The precise treatment is set out in the facility documentation for each transaction.
Can restricted or control shares be used?
Restricted and control shares are considered case-by-case. Silo’s published parameters refer to acceptable listed equity, listed for at least three months, with clear ownership and transferability.
Does Silo sell my shares to fund the facility?
Silo’s execution is prefunded; no securities selling is required for execution. Funds are released from prefunded capital on the borrower’s signature of the Closing Statement.
What sizes are typical?
Silo’s published typical facility size is USD 1M–150M+.
This material is provided for informational purposes only. Nothing herein constitutes investment, legal, tax, securities, accounting or regulatory advice, an offer to lend or provide financing, a solicitation, a recommendation, or a commitment to enter into any transaction. Access may be restricted by jurisdiction or residency. Any potential facility remains subject to Silo’s review, diligence, approval, jurisdictional analysis, compliance review and definitive documentation. Readers should consult their own professional advisers.