Many promoters, professionals, and entrepreneurs build wealth through equity investments. What’s often overlooked is that these investments don’t have to sit idle when liquidity is needed.
You can raise funds without selling your shares. That’s exactly where Loan Against Securities (LAS) comes in.
1. What Is Loan Against Securities (LAS)?
Loan Against Securities allows you to raise funds by pledging listed shares, mutual funds, or other approved securities.
Your ownership remains intact. The lender provides funding based on the quality, liquidity, and market category of the securities you hold.
2. Why the Category of Shares Matters
Not all shares are treated equally under LAS.
Lenders classify equity holdings into:
- Large-cap
- Mid-cap
- Small-cap
This classification directly determines the loan-to-value (LTV) — or how much funding you can unlock.
3. Large-Cap Shares: Maximum Comfort, Higher Funding
Large-cap companies are well-established, liquid, and relatively stable.
Typical funding range:
- Around 45%–50% of current market value
Why lenders prefer them:
- Easy liquidity in case of exit
- Lower price volatility
- Strong daily trading volumes
Portfolios dominated by large-caps usually receive the highest funding comfort.
4. Mid-Cap Shares: Balanced Risk, Moderate Funding
Mid-cap stocks offer higher growth potential but come with more price movement.
Typical funding range:
- Around 30%–35% of market value
Lender approach:
- Funding allowed, but in a controlled manner
- Exposure is capped to manage volatility
Mid-caps are generally accepted, but selectively.
5. Small-Cap Shares: Limited or No Funding
Small-cap stocks tend to be highly volatile and less liquid.
Typical lender stance:
- Very low LTV or restricted funding
- In many cases, not accepted at all
Reason:
- Sharp price swings
- Thin trading volumes
- Higher downside risk
To protect risk, lenders usually cap or exclude small-cap exposure.
6. How LAS Works in Simple Terms
- Shares are pledged with the lender
- Loan amount is calculated based on share value and category
- Funds are disbursed without selling the shares
- Interest is charged only on the amount utilised
- Shares are released once the loan is fully repaid
This structure provides liquidity while keeping long-term investments intact.
7. Who Should Consider a Loan Against Securities?
LAS works well for:
- Promoters needing short-term liquidity
- Entrepreneurs avoiding equity dilution
- Professionals funding business expansion
- Individuals looking to meet capital needs without selling assets
Loan Against Securities is not about liquidating wealth. It’s about using your investments intelligently to manage liquidity.
Understanding how different share categories impact funding helps you unlock value while preserving long-term portfolio potential.
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