A Lombard loan is a Swiss bank credit secured by a pledge on financial assets — securities portfolio, bonds, fund units — deposited as collateral with the lending bank. The borrower retains ownership of the pledged assets and receives their income (dividends, interest), but must maintain sufficient collateral value. If asset values fall, the bank may issue a margin call requiring additional collateral. It is widely used by Swiss shareholders and entrepreneurs to access liquidity without selling their shareholdings. In due diligence, Lombard loans secured by target company shares constitute a critical finding: a margin call could force an involuntary disposal of shares.

‍

Example: a target company's majority shareholder has pledged 40% of the company's shares as Lombard loan collateral for a CHF 3.0 million credit. In the acquisition process, this pledge must be released before share transfer at closing — requiring early repayment of the Lombard loan, financed from a portion of the acquisition proceeds. Failure to identify this pledge in due diligence could have blocked the closing.

‍

Hectelion identifies Lombard loans secured on target shares as a systematic due diligence step, coordinating their release as part of the closing package.