What happens if the market drops?

Imagine you borrowed against a $1 million portfolio with a 50% advance. If the portfolio drops to $700k, the same loan balance represents a much higher percentage of collateral value. Your documents specify thresholds—sometimes hard triggers, sometimes graduated warnings—that tell you when to post more security or reduce debt. Volatile names move these ratios faster than diversified indices.

Depending on your agreement, responses may include posting cash, adding eligible securities, substituting collateral where permitted, or partial repayment. Some facilities allow brief cure windows; others move quickly in stress. Do not assume your lender will “wait it out” because you are a long-time client—credit policies often apply mechanically during shocks.

Keep liquidity outside the pledged pool specifically reserved for potential calls. Avoid spending loan proceeds in ways that leave you cash-poor if markets gap down. Diversification across pledged names (when allowed) reduces correlation shocks. For advance-rate context, read LTV guide and collateral valuation.

Single-stock concentration, leveraged ETFs, thin liquidity, or simultaneous personal/business cash crunches compound drawdown risk. If your income depends on the same macro factor as your collateral (e.g., tech salary plus tech-heavy pledge), stress cases deserve extra honesty. Read official risks, compare paths on official risks, review stock loans, and if you need a structured review across 80+ exchanges, use get started. Executives & RSUs may fit concentrated equity profiles.