Recourse or Non-Recourse? What the Difference Means When You Borrow Against Shares
Borrowing against a share portfolio is common, and most of that borrowing gives the lender a claim on more than the shares. In the US alone, brokerage customers owed US$1.48 trillion in their margin accounts at the end of September 2026, up from US$1.18 trillion in October 2025, according to FINRA’s margin statistics.
In Hong Kong, the Investor and Financial Education Council’s guide to buying on margin tells clients: “It is possible for you to lose more than your margin deposit under forced liquidation.” That sentence describes a recourse loan, but non-recourse financing is an option as well.
What recourse means
A loan secured on shares can be recourse or non-recourse, and for most of its life the borrower may not notice which. The difference shows only after a shortfall, when the shares are sold for less than the amount owed.
Under a recourse loan, the lender can sell the shares if the borrower does not meet a margin call, and if the sale does not cover the debt, the borrower still owes the rest. The IFEC guide says such a client “will not only lose all your margin deposit but will also be liable to the remaining shortfall in your account.”
In most major markets, margin lending works this way. Australia’s government-run Moneysmart service notes in its guide to borrowing to invest that margin lenders require borrowers to keep the loan-to-value ratio below an agreed level, usually 70%, and that a borrower who receives a margin call generally has 24 hours to bring it back down before the lender starts selling.
Under non-recourse financing, the provider’s claim is limited to the shares that secure it, so if the shares are sold and the proceeds fall short of the amount owed, the provider bears the loss itself. This structure is common in commercial property and project finance, where lenders look to a building or a power plant rather than to its owner. Against listed shares, fewer providers offer it.
The provider’s view
A provider that cannot look beyond the shares has to make its credit decision on the shares. Their price history matters. So does the trading volume behind them, the size of the holding relative to that volume and how long a sale would take, because a provider with no claim on anything else needs to know it could sell the shares in an orderly way if a call went unmet. The client’s income counts for less.
In practice, a non-recourse provider’s main protection lies in three clauses: the advance rate, the margin-call level and the notice period. Each is worth reading closely.
The limits
Non-recourse limits what the provider can claim. Market risk stays with the client for the term. A client who misses a call, or fails to repay the loan at maturity, loses the shares. The two structures differ after that sale: a recourse lender can still pursue any shortfall, and a non-recourse provider cannot.
EquitiesFirst is one provider that offers non-recourse equity-backed financing, meaning its recourse is limited to the shares provided under the facility rather than the client’s wider assets. It provides that financing to founders, significant shareholders of listed companies, family offices and high-net-worth investors across Asia, Europe and the Middle East.
A growing share of borrowing
US margin balances rose by about a quarter between October 2025 and September 2026, on FINRA’s figures. Under FINRA’s rules, every one of those margin customers is told they can lose more than they deposit. For investors whose wealth sits in one or two large holdings, that makes the recourse clause one of the first things to settle with any provider, before the rate is agreed.
