If your net worth is locked up in private company shares, there are only a few ways to turn any of it into cash before an exit. Selling is the obvious one. Borrowing against the shares is the quieter alternative — and it works very differently.
This guide explains what a share-backed loan on private stock actually is, how the mechanics work, the trade-offs versus selling in a secondary transaction, and — importantly — who this path realistically fits. The short version: borrowing lets you keep your shares and your upside, but it adds debt, interest, and a new set of risks that a straight sale doesn't carry.
This is not tax advice. Consult a qualified tax professional before you borrow against or sell private company shares.
Key concept
Selling converts shares into cash and ends your exposure to those shares. Borrowing keeps the shares in your name — you get cash now and retain the upside — but you take on a debt that has to be repaid, with interest, and you stay exposed if the valuation falls. One removes concentration risk. The other keeps it and adds leverage.
Why This Is in the News
In August 2026, Europe's most valuable startup asked its shareholders to approve a roughly fivefold increase — to $250 million — in how much its chief executive can borrow against his stake in the company, and to remove a board-approval requirement for larger share pledges, per The Irish Times. The chief executive owns roughly 29% of the business, which was valued at around $115 billion in an employee secondary share sale launched the month before.
The story is a useful window into a structure most shareholders never see up close: instead of selling shares to raise cash, a large holder pledges them as collateral for a loan. As the reporting notes, borrowing lets you keep the upside if the valuation keeps climbing — but it carries the risk of a margin call if things move the other way. It's a real liquidity path, and it sits alongside — not on top of — the secondary sale that most shareholders use.
Here's what a share-backed loan like this typically looks like, and how to think about it against simply selling.
What a Share-Backed Loan Is in Plain English
A share-backed loan (sometimes called a stock-secured loan, an equity-collateralized loan, or informally a "margin loan" on private stock) is a loan where your shares are the collateral. You don't sell them. A lender advances you cash, and if you fail to repay — or if the value of the collateral falls too far — the lender can lay claim to the shares.
A related structure is the prepaid variable forward, where you receive cash now in exchange for agreeing to deliver a variable number of shares at a future date. It's not technically a loan, but it rhymes: cash today, shares stay in your name for now, settlement later. Both structures share the same appeal — liquidity without a present-day sale — and the same core tension: you're borrowing against an asset that is illiquid and hard to value.
The critical difference from selling: with a sale, the transaction is over once you're paid. With a loan, you now have an ongoing obligation that runs until the company exits or the loan matures — potentially many years.
How a Share-Backed Loan Works
Step 1: Valuation and loan-to-value. The lender estimates what your shares are worth, then offers to advance a fraction of that — the loan-to-value ratio. Because private shares are illiquid and can swing in value, that fraction is often conservative (well below the paper value), leaving a cushion of collateral above the loan.
Step 2: Pledge and documentation. You pledge the shares as collateral and sign the loan agreement. This is where the fine print lives: interest rate, term, what happens if the valuation drops, and what rights the lender has over the shares. Your equity agreements and the company's transfer restrictions still apply — pledging shares can itself require company or board consent.
Step 3: Funding. You receive the cash. You keep legal ownership of the shares and, in most structures, your upside exposure.
Step 4: Interest accrues. Interest builds over the life of the loan. On private stock, the term can be long — you may be carrying the debt for years until an exit — so the interest can compound into a meaningful number.
Step 5: Repayment at exit (or maturity). When the company IPOs or is acquired, the loan plus accrued interest is repaid, typically out of the sale proceeds. You keep whatever is left. If the loan matures before an exit, you either refinance, repay from other funds, or settle by handing over shares.
Example
You hold 100,000 shares that a lender values at $40 each — $4,000,000 on paper. The lender offers a 30% loan-to-value advance: $1,200,000 in cash, with your shares pledged as collateral at 8% annual interest. Four years later the company is acquired and your shares sell for $60 each ($6,000,000). You repay the $1.2M principal plus roughly $384,000 of accrued interest, and keep about $4.4M. You captured the upside — but you paid roughly $384,000 for the liquidity, and you carried the risk the whole way. Had the shares instead fallen to $20, the lender's collateral cushion would have thinned fast, and you could have faced a demand to post more collateral or repay early.
⚠️ The margin-call risk is the one people underestimate. If the company's valuation falls, the collateral behind your loan is worth less, and the lender can demand you post more collateral or repay part of the loan early — often at the worst possible moment, when your shares are hardest to sell. A secondary sale has no such feature: once you've sold, a later down round is not your problem.
Borrowing vs. Selling in a Secondary
Both paths turn illiquid shares into usable cash. They differ on almost everything else.
Ownership and upside. Borrowing keeps the shares in your name, so you keep the upside if the company keeps climbing. A secondary sale transfers the shares to a buyer — you get cash, but you give up future gains on the shares you sold.
Concentration risk. This is the one that gets overlooked. Selling reduces how much of your net worth rides on a single private company. Borrowing does the opposite — you still own the shares and now you've added debt against them, so a bad outcome hits you twice.
Downside exposure. If the valuation falls after you've sold, it doesn't affect you. If it falls after you've borrowed, your collateral shrinks and you may face a top-up demand or clawback. For a sense of how private valuations can move, see why the last round's valuation can be misleading.
Cost. A secondary sale usually involves a discount to the headline price and transaction fees, paid once. A loan involves interest that accrues for as long as you hold it — a cost that grows the longer the company stays private.
Tax timing. A sale is generally a taxable event. Loan proceeds are generally not treated as income when received, which is why borrowing is sometimes described as deferring tax. But structure matters — some arrangements can be recharacterized — so this is a question for a professional, covered further in tax considerations for a secondary sale.
Complexity and access. A secondary sale is a relatively standard transaction available to many shareholders. Share-backed lending on private stock is a bespoke, negotiated arrangement, and — as covered below — it isn't available to most people.
For more on this topic
For the full menu of ways to get cash from private shares — including how share-backed loans sit alongside tender offers and direct secondaries — see our guide to startup equity liquidity options.
Who This Is Actually For
It's worth being clear-eyed here, because the headlines can be misleading. Lending arrangements backed by private company equity tend to be available only to founders and large early holders with stakes in the most well-known and highly valued firms. The reasons are structural: the lender needs deep, credibly valuable collateral and a plausible path to an exit that repays the loan. A large founder stake in a company valued in the tens of billions clears that bar. A few thousand vested options at an early-stage startup usually doesn't.
So the recent headlines about a founder borrowing hundreds of millions against a stake are the exception, not a template. For the vast majority of employee shareholders, the realistic liquidity paths are a company-run tender offer or a direct secondary sale — not a share-backed loan.
Even for those who can access it, borrowing suits a specific profile: high conviction in continued upside, the financial capacity to absorb a margin call, and a genuine need for cash that doesn't justify giving up the shares. If any of those is missing, the trade-offs tilt back toward selling.
The Question That Comes First
Whether you're weighing a loan or a sale, the first question is the same: what are your shares actually worth? Borrowing decisions, loan-to-value offers, and secondary prices all key off that number, and the last round's headline valuation is often a poor proxy for it. Knowing your realistic share value — by share class — is what lets you judge whether a loan advance is generous or thin, and whether a secondary offer is fair.
It's also worth remembering that not every private company reaches an exit. If you've borrowed against shares in a company that never IPOs or gets acquired, the debt doesn't disappear just because the shares never became liquid. That asymmetry is the strongest argument for understanding exactly what you're pledging before you pledge it.
The Takeaway
Borrowing against private shares and selling them are not the same trade dressed up two ways. Selling ends your exposure and your obligation; borrowing keeps your upside but adds debt, interest, and a margin-call risk that can surface precisely when your shares are hardest to move. For most shareholders, borrowing simply isn't on the table — and even when it is, it only makes sense with high conviction, real capacity to weather a downturn, and a clear-eyed view of your share value. Start there.
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Earlyasset, Inc. does not provide investment advice and is not a registered investment adviser. Pricing estimates are algorithmic and do not constitute an offer to buy or sell securities. All transactions respect the company's right of first refusal (ROFR) and any transfer restrictions in your equity agreements. Direct liquidity is provided by Earlyasset Capital, LLC, a separate entity from Earlyasset, Inc.
Tax disclaimer: This article is general educational content only and does not constitute tax, legal, or financial advice. Tax treatment of secondary transactions and share-backed borrowing varies significantly based on equity type, holding period, state of residence, individual circumstances, and other factors. Consult a qualified CPA, tax attorney, or financial advisor before making any transaction decision. Earlyasset, Inc. is not a tax advisor and does not provide tax guidance.
Source note: Information about Revolut's proposed increase to its chief executive's share-pledge borrowing limit is based on public reporting as of August 19, 2026. Earlyasset is not affiliated with Revolut and has no non-public information about this matter. Shareholders considering borrowing against or selling shares should consult their own legal, tax, and financial advisors.