What Happens If Your Stock Falls During a Loan?

What happens depends on the recourse profile written into your facility. Both structures share a starting mechanic: the loan is advanced against a buffer, so the amount lent is a fraction of the share value, leaving headroom for a decline. In a recourse or margin facility, that headroom is monitored against a maintenance threshold; if the holding falls far enough that the loan-to-value ratio breaches the agreed level, the lender issues a margin call requiring you to post additional collateral or repay part of the principal within a defined cure period. In a non-recourse facility, no such call arises. The lender has priced the downside into the original advance rate and bears the price risk below the agreed level. A moderate fall that stays within the buffer changes nothing in either case — interest accrues, the shares remain pledged, and the facility runs as documented. The distinction matters most in a sharp, sustained decline, which is precisely when borrowers discover which structure they chose. Our risk factors page sets out these scenarios in fuller detail.

A margin call is a demand, in a recourse or margin-style facility, that you restore the loan-to-value ratio to within the agreed level once a price fall has pushed it past the maintenance threshold. You typically satisfy it in one of two ways: by posting additional eligible collateral, or by repaying a portion of the principal — either of which lowers the ratio back into the permitted range. Facilities usually allow a short cure period rather than demanding settlement instantly, though the window is finite and failure to meet the call can lead to the lender realising the collateral. The most reliable way to avoid a call is structural: choosing a conservative opening ratio so the buffer is wide, or selecting a non-recourse profile where no call mechanism exists. Our note on avoiding margin calls sets out the practical options, and the trade-offs between recourse types are discussed under eligibility. Whether a call can arise at all is fixed by the structure, not by market conditions.

The choice turns on a single trade-off: cost against certainty. A full-recourse facility typically offers a higher advance rate and a lower interest cost, because the lender retains a claim against you beyond the collateral — but it exposes you to margin calls and, ultimately, personal liability for any shortfall. A non-recourse facility removes that exposure entirely at the price of a lower advance and a higher rate. Between the two sits limited-recourse, where liability is capped at a defined level rather than eliminated. The right answer depends on how concentrated the position is, how much of your wealth it represents, your tolerance for posting further collateral, and whether a forced sale would carry consequences beyond the financial. A founder or substantial shareholder with disclosure obligations often values certainty over headline advance rate; a borrower with ample outside liquidity may reasonably accept call risk for cheaper funding. The firm quotes indicative ratios only after reviewing the position, and you can begin that conversation through contact. Specifics depend on the holding and jurisdiction, and independent advice should be taken.