In the world of private wealth and pre-IPO holdings, illiquidity is often a strength — until you need cash.
You may be sitting on a substantial equity position in a company that isn’t publicly traded, or trades thinly on a small-cap exchange. There’s value there — but it’s locked. Traditional banks won’t touch it. Most private lenders won’t either.
And yet, in the right structure, even illiquid shares can unlock meaningful liquidity.
Let’s walk through how.
The Situation: High Value, No Market
Say you’re a founder in a late-stage company, pre-IPO. Your shares are worth millions on paper. But you’re years away from an exit. You need liquidity — not to cash out entirely, but to fund a new venture, invest, or meet a tax obligation.
The challenge? There’s no clear exit path today. And selling would require secondary market negotiations, legal gymnastics, and usually a steep discount.
That’s where non-recourse share financing comes in.
How It Works
A specialized lender — often a fund that understands pre-IPO or thinly traded equities — assesses the shares based on:
- Company fundamentals
- Expected timeline to liquidity (IPO, M&A, SPAC, etc.)
- Historical secondary trades or implied valuation
- Borrower profile and reason for financing
If the case is strong, a loan is structured using the shares as collateral. It’s non-recourse, often 12–36 months in term, and can offer 25–50% LTV depending on risk.
You don’t sell. You don’t dilute. You stay aligned with your company — and get liquidity when it matters most.
Why It’s Different
This isn’t cookie-cutter lending. It’s bespoke.
It works when the lender has the network, legal skill, and risk appetite to structure a deal where others can’t. It’s part underwriting, part storytelling — and entirely dependent on trust.
Done right, it creates alignment: the borrower keeps upside, and the lender gets collateral that may unlock substantial value later.
When to Consider It
- You hold restricted or pre-IPO shares with real (but locked) value
- You’re unwilling to sell but need cash for strategic reasons
You want to stay long while solving for near-term liquidity