Funding a Business Expansion Without
Disturbing a Board-Held Position
Collateral: Single-stock holding, publicly listed, approx. $9M
Loan Amount: $4.5M (50% LTV)
Term: 5 years, fixed rate
Rate: Fixed, paid quarterly
Repayment: At maturity
Purpose: Expansion capital for a separate private venture
A US-based biotech founder in his early 50s, whose company had listed on the public markets several
years prior. He still held a significant stake from his time as an executive there, worth around $9 million,
and had deliberately kept it intact rather than diversifying, given his continued involvement with the board.
He had started a second, unrelated venture, a small medical devices company, and needed capital to fund
a manufacturing expansion. Selling down his public shareholding would have meant a substantial capital
gains bill, and he was also conscious that a large disposal might be read by the market as a loss of
confidence in the company he still sat on the board of, something he wanted to avoid.
Because he was a board member, any sale of his shares would need to be disclosed and timed carefully
around trading windows, adding friction and signalling risk to an outright sale. He needed a source of
capital that did not involve touching his position in the public market at all.
A lender was sourced who was willing to advance 50% loan-to-value against the position, reflecting the
size and liquidity of the underlying stock and his long holding history. The loan amount came to $4.5
million, structured as a five-year fixed-rate loan with interest paid quarterly, giving him room to complete
the expansion, let the new venture stabilise, and build up its own cash flow before the loan needed to be
repaid.
The full $4.5 million loan was used to finance the manufacturing expansion of the new venture. Using his
publicly listed shareholding as collateral enabled him to raise the capital required without creating a
market signalling event or triggering an immediate capital gains tax liability, allowing the expansion to
proceed without the need for an outright sale of his shares.
This case is illustrative, and is built to demonstrate the types of arrangements we coordinate, with figures and details
altered to protect client confidentiality. The benefits and risks are simplified for this purpose.