An unvested EMI option is a contractual right, not a share – and this single distinction genuinely determines whether a lender will consider it as collateral at all. If you’re holding options you haven’t yet exercised, understanding exactly where the line sits matters before you assume any part of your equity package can be used to raise funds.
The Genuine Answer: No, Not Directly
Our Unlisted Stock Loans page covers borrowing against private company equity generally; this page focuses specifically on the vesting and exercise question that trips up a genuine number of employee shareholders. Lenders can only realistically lend against shares you actually own – meaning vested options that have also been exercised, converting your contractual right into genuine share ownership. An unvested option, or even a vested but unexercised one, isn’t something you can pledge, since you don’t legally own the underlying shares until you’ve exercised.
Why Exercise Itself Creates a Genuine Liquidity Problem
Exercising your options means paying the agreed strike price to actually acquire the shares, and this is worth understanding as a genuine cash outlay you need to fund before you own anything a lender could consider as collateral. This creates a real chicken-and-egg problem for some option holders: you need cash to exercise and acquire the shares, but you don’t yet have shares to borrow against to raise that cash.
What Genuinely Changes Once You’ve Exercised
Once your options are exercised and vested, you hold genuine shares in the company, which our Unlisted Stock Loans page covers in full detail – including the illiquidity discount lenders typically apply, and why facility terms for this kind of collateral commonly run considerably longer than for listed shares, often 1 to 10 years, reflecting the genuinely longer, less predictable path to an eventual liquidity event.
The April 2026 EMI Reforms Worth Knowing About
It’s worth understanding that EMI scheme rules genuinely changed for options granted from 6 April 2026 – the gross assets threshold for qualifying companies rose from £30 million to £120 million, the employee headcount limit doubled to 500, the total value of options a company can grant increased to £6 million, and the maximum exercise period extended to 15 years. This means a considerably larger pool of scale-up companies, and their employees, now genuinely qualify for EMI treatment than before this date.
Business Asset Disposal Relief: A Genuinely Moving Target
If you’re planning an eventual sale of exercised EMI shares, it’s worth knowing the Business Asset Disposal Relief rate has genuinely changed recently – rising from 10% to 14% in April 2025, and reaching 18% from April 2026, meaning this relief is considerably less generous than it once was, though still meaningfully below standard Capital Gains Tax rates. A minimum two-year holding period from the point of exercise is generally required to qualify.
Why the Two-Year Holding Period Genuinely Interacts With Borrowing
If you’re weighing up borrowing against exercised shares versus selling them outright, it’s worth factoring in whether you’re still within your qualifying holding period for Business Asset Disposal Relief. Our piece on stock loans vs selling shares covers this genuine tax comparison in more depth, worth reading alongside this page since borrowing rather than selling can let you access liquidity now while preserving your eligibility for the lower relief rate on an eventual sale later.
Founders vs Employee Option Holders: A Genuinely Different Starting Position
If you’re a founder holding direct equity rather than exercised options, our piece on founder liquidity using pre-IPO shares covers the equivalent liquidity gap founders face, worth reading alongside this page since the underlying lock-up and valuation mechanics genuinely overlap once a listing is on the horizon, even though your starting equity position differs.
If You’re Also a Company Director
Many EMI option holders are also directors of the company granting their options, and our Company Director Mortgages page covers a genuinely related consideration – how salary, dividends, and retained profit are assessed differently for standard mortgage purposes, worth understanding alongside any securities-backed borrowing if you’re also applying for a mortgage using your company income.
What Lenders Will Genuinely Want to See
If you’ve exercised your options and hold genuine shares, a lender will want evidence of your exercise, your specific EMI scheme documentation, the company’s most recent valuation, and confirmation of your genuinely vested, unencumbered ownership. It’s worth having this documentation organised clearly, since private company shareholdings are already more complex for a lender to assess than listed shares, and gaps in your paperwork can genuinely slow the process further.
Why Non-Recourse Structures Are Particularly Common Here Too
Given the genuine uncertainty around when, or whether, your private company shares will ever reach a liquidity event, non-recourse structures are common for this kind of collateral, limiting your liability to the pledged shares themselves if the anticipated exit doesn’t materialise. Our Securities Lending hub covers this structure across the full range of products, worth discussing with your broker given the genuinely long, uncertain timeline private company equity often involves.
Getting Genuinely Clear Advice Before You Assume Borrowing Is an Option
Given how much genuinely depends on your specific vesting and exercise status, it’s worth having a clear conversation about where you actually stand before assuming any part of your option package can be used as collateral. Get in touch with details of your EMI scheme and vesting position, and we’ll help you understand your genuine options.
Frequently Asked Questions
Can I borrow against unvested EMI options?
No – an unvested option is a contractual right, not a share, meaning there’s genuinely nothing a lender can take as collateral until you’ve both vested and exercised.
What about vested options I haven’t exercised yet?
Still generally not lendable – you don’t legally own the underlying shares until you’ve paid the strike price and exercised, converting your right into actual ownership.
How has the EMI scheme changed for 2026?
From 6 April 2026, the qualifying company asset threshold rose to £120 million, the employee limit doubled to 500, the total option pool increased to £6 million, and the maximum exercise period extended to 15 years.
What’s the current Business Asset Disposal Relief rate on EMI shares?
18% from April 2026, up from 14% in 2025 and 10% previously, generally requiring a two-year holding period from exercise to qualify.
Should I borrow against my exercised shares or sell them?
This genuinely depends on your specific tax position and holding period – borrowing can preserve your eligibility for a lower relief rate on an eventual sale later.
Get in touch with details of your EMI scheme and vesting position, and we’ll help you understand whether borrowing against your equity is genuinely possible for your circumstances.
