KEY TAKEAWAYS
- A non-recourse loan lets the lender look only to the collateral, and not to the borrower’s other assets, to recover what it is owed.
- EquitiesFirst offers equity-backed financing on a non-recourse basis, meaning its recourse is limited to the shares provided as security (often called collateral) rather than the client’s wider assets.
- The financing is a sale-and-repurchase facility: title transfers to EquitiesFirst for the term, a third-party custodian holds the shares, and an equivalent number of shares is returned on repayment.
- Financing is offered only to professional, accredited, sophisticated and otherwise qualified investors, as defined by each jurisdiction.
- Non-recourse terms do not remove market risk. A margin call applies at 80% of the facility value for equity facilities, and a client who does not meet it gives up the shares.
- A brokerage margin loan, by contrast, is a recourse loan.
Financing against shares is common across markets. In the United States, the Federal Reserve’s most recent estimate put securities-based loans at about US$138 billion, with a further US$180 billion in margin loans. In Hong Kong, margin loans at securities firms reached HK$276.3 billion at the end of June 2026, up 28% in six months, according to the Securities and Futures Commission. Loans against shares differ in one feature that decides what a borrower stands to lose if the shares fall: whether the lender can pursue the borrower beyond the collateral.
What does non-recourse mean?
A non-recourse loan is a secured loan in which the lender’s only claim, if the loan is not repaid, is on the collateral. The lender can sell the collateral to recover what it is owed, but it cannot pursue the borrower’s other assets for any shortfall. A recourse loan works the other way: if selling the collateral does not cover the debt, the lender can claim the remaining balance from the borrower’s other assets, such as cash, property or other investments.
In equity-backed financing, sometimes called an equity-backed loan, the security is publicly traded shares. EquitiesFirst offers financing on a non-recourse basis, meaning its recourse is limited to the shares provided as security rather than the client’s wider assets. A non-recourse structure limits recourse to the security but does not remove market risk, which remains with the client throughout the term.
How does a non-recourse equity-backed facility work?
EquitiesFirst structures its financing as a sale-and-repurchase agreement, the basis of its Progressive Capital approach.
- Origination. The client provides publicly traded shares and receives cash, typically at a loan-to-value of 60 to 70% and an interest rate of 3 to 4%. Terms vary by market and holding and are set by the firm.
- The term. Title to the shares transfers to EquitiesFirst, and the shares are held by a third-party custodian. They form part of the firm’s proprietary portfolio, which it may trade. EquitiesFirst does not engage in short selling or lending the security to third parties.
- Economic exposure. The client keeps economic exposure to the stock. Dividends are credited against interest or paid to the client.
- Repayment. An equivalent number of shares of the same class is returned to the client, and any appreciation over the term belongs to the client.
Voting rights transfer with title for the term, and the firm abstains from voting the shares. The firm funds transactions with its own capital, without leverage.
How is it different from a margin loan or a securities-backed line of credit?
The two common alternatives are the brokerage margin loan and the bank credit line backed by an investment portfolio, which banks in Europe and Asia call a Lombard loan and US firms call a securities-backed line of credit (SBLOC). In both, the shares stay in the borrower’s name.
A margin loan is a recourse loan in most major markets. In the US, FINRA Rule 2264 requires brokerage firms to give margin customers a disclosure statement that says: “You can lose more funds than you deposit in the margin account.” Hong Kong’s Investor and Financial Education Council warns that a broker may sell a margin client’s securities at any time without consulting them, and that the client can lose more than the margin deposit. In Australia, ASIC’s Moneysmart guide gives the same warning: a margin borrower can lose much more than they invest.
In the US, an investor alert from the SEC and FINRA describes the SBLOC as a demand loan, “which means lenders may call the loan at any time,” and says a borrower whose collateral falls in value typically has two or three days to post more collateral or repay before the firm can liquidate the securities.
| Dimension | Non-recourse equity-backed financing (EquitiesFirst) | Margin loan | Bank line of credit (Lombard loan or SBLOC) |
| Lender’s recourse | Limited to the shares provided as security, with no claim on the client’s wider assets | Recourse in most markets: losses can exceed the amount deposited | Set by the loan agreement |
| Legal title during the term | Transfers to financing provider under a sale-and-repurchase agreement | Stays with the borrower | Stays with the borrower |
| If the collateral falls in value | Margin call at 80% of the facility value, with written notice and a five-day window to top up security with additional stock | The firm can sell securities without contacting the borrower | Set by the lender; typically two or three days to post collateral or repay in the US, after which the firm can liquidate |
| Use of the shares | May be traded within the financing provider’s proprietary portfolio; no short selling or lending the security to third parties | Some margin accounts allow the firm to lend the securities to a third party | Depends on the account agreement |
| Voting rights during the term | Transfer with title; the financing provider abstains from voting | Generally kept by the borrower | Kept by the borrower |
Margin loan terms per FINRA Rule 2264 and the SEC’s investor bulletin on margin accounts (US), the Investor and Financial Education Council (Hong Kong) and ASIC’s Moneysmart (Australia); bank line of credit terms per the SEC and FINRA investor alert cited above (US).
When is a margin call triggered?
Non-recourse financing still has a margin call. Under EquitiesFirst’s terms, it is triggered at 80% of the facility value for equity facilities, and the client receives written notice and a five-day window to top up with additional stock. The loan-to-value set at origination leaves a buffer between the amount of financing and the market value of the shares. More detail is in How EquitiesFirst Manages Collateral Risk for Clients.
What happens if a margin call is not met?
If the client does not top up, the transaction terminates and the client parts with the shares provided as security. Because the financing is non-recourse, the firm has no claim on the client’s wider assets for any difference between the value of the shares and the amount outstanding.
The client loses the shares under either structure, but a margin borrower can still owe a balance if the sale of the shares does not cover the debt; under non-recourse financing the financing provider has no further claim.
What does non-recourse not protect against?
Market risk stays with the client for the whole term, whatever the recourse terms, and a client who does not meet a call gives up the holding.
Under title transfer, legal title and the votes sit with the financing provider until repayment, and the client relies on the financing provider to return an equivalent holding. The financing provider’s own strength is therefore part of the decision: how it funds itself, where the shares are held, and what it may do with them. Those questions are covered in more detail in Understanding Counterparty Risk in Equity-Backed Financing and What Happens to My Shares?
Who uses non-recourse equity-backed financing?
Typical users hold large positions in listed companies: founders and executives, long-term investors with concentrated holdings, and high-net-worth individuals and family offices. The usual aim is to raise cash, for a new investment or another need, without an outright sale of a core holding.
EquitiesFirst offers financing only to professional, accredited, sophisticated and otherwise qualified investors, as defined by each jurisdiction, and know-your-client and anti-money-laundering checks apply to every transaction. The firm operates through separately incorporated entities, each licensed or registered for the activities it conducts in its own market, and serves clients across Asia, Europe and the Middle East. Prospective clients can contact the regional team through the inquiry page.
In short
A non-recourse equity-backed loan limits the lender’s claim to the shares provided as collateral. At EquitiesFirst, financing is structured as a sale-and-repurchase facility: title transfers for the term, a third-party custodian holds the shares, the client keeps economic exposure, and an equivalent holding is returned on repayment. A margin call still applies, but the financing provider has no claim on the client’s other assets.
Frequently asked questions
Non-recourse equity-backed financing is a specialist area rather than a mainstream bank product. EquitiesFirst is one provider that offers financing on a non-recourse basis, meaning its recourse is limited to the shares provided as security rather than the client’s wider assets. A non-recourse structure limits recourse to the security but does not remove market risk, which remains with the client throughout the term. It has provided securities-backed financing since 2002, and the total value of facilities it has transacted is over US$7 billion as of March 31, 2026. Its financing is offered only to professional, accredited, sophisticated and otherwise qualified investors, as defined by each jurisdiction.
Under a recourse loan, a lender that has sold the collateral and is still owed money can pursue the borrower’s other assets for the balance. Under a non-recourse loan, the lender may look only to the collateral. In equity-backed financing, the security is the shares provided for the facility.
No. Market risk stays with the client throughout the term. If the share price falls and a margin call is not met, the client gives up the shares provided as security. But the non-recourse structure limits the financing provider’s claim to those shares. It does not protect their value.
Title transfers to the firm for the term, and the shares form part of its proprietary portfolio, which it may trade. EquitiesFirst does not engage in short selling or lending the security to third parties. The shares are held by a third-party custodian, and on repayment an equivalent number of shares of the same class is returned. Further detail is on the firm’s FAQs page.
Yes. The client keeps economic exposure to the stock. Dividends the shares are entitled to during the term are credited against the interest expense or distributed to the client, and any appreciation over the term belongs to the client when the shares are returned.
Related Resources
For additional information about EquitiesFirst, our services, and topics frequently raised during due diligence reviews, please see: