Volatility Returns to Focus for Lenders and Borrowers in Equity Based Loans

Global markets have shown renewed volatility in recent weeks with swings in major indices and shifts in investor sentiment. This has brought questions about leverage and liquidity back into the spotlight.

Volatility matters more to stock backed lenders than many market participants realize. When prices fluctuate broadly lenders adjust valuation models more often and tighten requirements for secured financing. Participants in the lending space are already reporting more frequent reviews of collateral and risk parameters.

For borrowers this means it is becoming more important to have a clear view of how pricing and valuation changes could affect their access to funds. Borrowers who relied on relatively calm market conditions in the past may now find they need deeper dialogue with their lenders.

The renewed unpredictability in markets is thus forcing both sides to consider risk management more carefully. In the context of securities based loans having a flexible liquidity plan is now considered a core part of financial strategy.