Understanding Loan-to-Value (LTV) in Stock Loans
How much can you borrow against your stock? It all comes down to LTV.
Loan-to-value (LTV) is the most important number in any stock loan offer. It determines how much you can borrow and affects your risk level during the loan term.
What is Loan-to-Value (LTV)?
LTV is the percentage of your portfolio's value that a lender is willing to loan you.
Formula: LTV = Loan Amount ÷ Portfolio Value × 100
Example: If you have $1 million in stock and qualify for a 50% LTV, you can borrow $500,000.
Why LTV Matters
LTV determines:
- How much you can borrow – Higher LTV = more liquidity
- Your risk level – Higher LTV = less buffer before default
- Your negotiating position – Understanding LTV helps you evaluate offers
What Affects Your LTV?
1. Security Type
Different securities carry different risk levels:
| Security Type | Typical LTV Range |
|---|---|
| Large-Cap (S&P 500) | 50-60% |
| Mid-Cap | 45-55% |
| Small-Cap | 40-50% |
| Micro-Cap | 35-45% |
| Nano-Cap | 25-35% |
| Restricted Stock (Rule 144) | 25–30% |
2. Trading Volume
Higher trading volume = easier for lender to sell if needed = higher LTV.
3. Volatility
Lower volatility = more predictable price = higher LTV.
4. Exchange
Major exchanges (NYSE, NASDAQ) typically offer higher LTVs than smaller exchanges.
5. Market Conditions
In stable markets, LTVs tend to be higher. In volatile markets, lenders may reduce LTVs.
LTV vs. Risk: The Tradeoff
Higher LTV isn't always better:
Example: $1 Million Portfolio
| LTV | Loan Amount | Stock Drop to Default |
|---|---|---|
| 50% | $500,000 | 50% drop |
| 60% | $600,000 | 40% drop |
| 70% | $700,000 | 30% drop |
At 50% LTV, your stock would need to drop 50% before your loan exceeds your portfolio value. At 70% LTV, only a 30% drop would put you underwater.
How to Maximize Your LTV
- Choose the right lender – Specialized lenders often offer higher LTVs for micro-cap stocks.
- Diversify your security – Multiple stocks may qualify for higher LTV than a single concentrated position.
- Consider a shorter term – 12-month loans may have slightly higher LTVs.
- Time your application – Stable markets often yield higher LTVs.
- Negotiate – If you have a strong portfolio, there may be room to negotiate.
Calculate Your Potential Loan
Step 1: Determine your portfolio value = Number of Shares × Current Price
Step 2: Estimate your LTV based on security type
Step 3: Calculate potential loan = Portfolio Value × Estimated LTV
Get Your Exact LTV
Estimates are helpful, but the only way to know your exact LTV is to get a term sheet.
Use Our Calculator