Unlisted Stock Loans
If you hold equity in a private company – as a founder, early investor, or executive with vested share options – an unlisted stock loan lets you access liquidity against that holding without waiting for a sale, listing, or other exit event.
At a Glance
| Loan-to-value | Typically 15-40%, reflecting the illiquidity of unlisted shares |
| Valuation basis | Most recent funding round or independent valuation, often with a 15-30% illiquidity discount applied |
| Facility term | Often 1-10 years, considerably longer than typical listed stock loans |
| Non-recourse structures | Common in this market |
| Regulatory status | Generally unregulated borrowing in the UK |
Why Unlisted Shares Are Assessed So Differently to Listed Stock
Without a public market price or the ability to sell quickly, lenders apply considerably more caution to unlisted equity than listed shares, reflected in a notably lower loan-to-value range – commonly 15-40%, compared with 50-80% for listed stock covered on our Stock Loans page. It’s worth setting realistic expectations about how much you can actually raise against this kind of holding.
How Illiquidity Discounts Work
Beyond the loan-to-value itself, lenders typically apply a discount of around 15-30% to the underlying share valuation before calculating what you can borrow, to account for the genuine difficulty of realising that value if the loan needed to be enforced. This compounds with the lower LTV, meaning the amount available against unlisted shares is meaningfully lower than the headline valuation might suggest.
Who Actually Uses This Kind of Lending
This is a genuinely specialist product used by founders and early investors with substantial equity in a private company, and by senior executives holding vested share options, commonly through EMI or similar schemes. It’s not aimed at passive minority shareholders with a small stake in a private business.
Why Facility Terms Run Considerably Longer
Given the longer, less predictable timeline to a genuine liquidity event – a sale, secondary transaction, or eventual listing – unlisted stock loan facilities commonly run from 1 to 10 years, considerably longer than the shorter terms typical of listed stock loans, and are often structured around the expected timeline to that eventual exit.
PIK Interest Structures
Given borrowers in this situation often have limited cash liquidity despite substantial paper wealth, payment-in-kind (PIK) interest structures – where interest accrues and is added to the loan balance rather than paid in cash during the term – are common, aligning the loan with your actual cash flow position rather than requiring regular cash payments you may not have.
Employee Share Options Specifically
If your equity comes from vested share options rather than a direct founding or investment stake, lenders will want to understand your specific scheme (commonly EMI options in the UK) and vesting position clearly, since this affects both the value and the practical mechanics of using the shares as collateral.
Why Non-Recourse Structures Matter Here
Given the genuine uncertainty around when and how a liquidity event will actually happen, many unlisted stock loans are structured on a non-recourse basis, limiting the lender’s claim to the pledged shares rather than pursuing you personally if the eventual exit doesn’t cover the outstanding balance.
Using Proceeds for a UK Property Purchase
Many founders and executives use unlisted stock loan proceeds toward a UK property purchase well ahead of an eventual exit event. Our High Value Mortgages page covers how larger UK property transactions are generally assessed alongside this kind of funding source.
Tax Considerations
Borrowing against unlisted shares isn’t a disposal for capital gains tax purposes. A taxable event arises only when the shares are eventually sold, which is worth planning for with a qualified tax adviser given the typically long facility terms involved. We are lending specialists, not tax advisers.
If Your Company Has Confirmed IPO Plans
If your company has specifically announced, or is reasonably expected to announce, an intention to list, our Pre-IPO Loans page covers that more specific, time-bound scenario, which is sometimes assessed slightly differently to general unlisted equity.
Frequently Asked Questions
Why is the LTV so much lower for unlisted shares than listed stock?
Illiquidity – without a public market or the ability to sell quickly, lenders apply more caution, reflected in both a lower LTV and a separate valuation discount.
How long can an unlisted stock loan facility run for?
Often 1-10 years, considerably longer than listed stock loans, generally structured around your expected timeline to an eventual exit event.
Can I use vested employee share options as collateral?
Yes, commonly through EMI or similar schemes, though lenders will want to understand your specific scheme and vesting position clearly.
What’s the difference between this and a pre-IPO loan?
Pre-IPO loans apply specifically where a listing is announced or reasonably expected; unlisted stock loans cover the broader, less time-bound scenario of holding private company equity generally.
Get in touch with details of your shareholding and funding requirements, and we’ll help you understand whether an unlisted stock loan is the right route for your circumstances.
