In light of pending tax increases, many people were advised to sell securities and/or accelerate income in 2012 to take advantage of the lower tax rates that were scheduled to end. While last year’s capital gains and dividend income are subject to last year’s lower tax rates (15 percent), the funds generated by year-end sales might have nonetheless created a larger tax bill for your 2012 return.

For many, this could mean having to liquidate assets to pay taxes. However, when you consider that both the Dow Jones Industrial Average and the Standard & Poor’s 500-stock index have posted strong performance in early 2013, liquidating might not be your best move. After all, selling positions this year will likely increase your tax obligation for next year – when the higher tax rates are applicable.

A Securities-Based Line of Credit can be used as an alternative source of funding instead of cash that might be earmarked for other needs. It can be useful for an individual or a small business owner when you need extra funds but would rather avoid selling off portions of your investment portfolio.

By borrowing against eligible assets in an investment portfolio, a bank will extend you a Securities-Based Line of Credit available for whenever you need an influx of cash. The SBLOC offers competitive rates based on the value of assets collateralized and not the loan amount. Be aware that a SBLOC can enable borrowing for a variety of purposes; however, it may not be used for the purchase of a securities investment.

You might want to open a SBLOC even if you don’t currently need cash so you have the resource ready when you do. Key reasons to use SBLOC assets may include:

• Renovations for your home or office
• Higher education expenses
• Short-term bridge financing
• To pay tax obligations
• Business expenses when cash flow is restricted
• Launch a new business venture
• For a timely non-securities investment opportunity, such as real estate
• To purchase a luxury item, such as a boat
• Pay for a vacation or business trip
• Consolidate debt

Having a SBLOC at your disposal gives you the ability to retain your current investments so you can still meet long-term financial objectives. It essentially leverages your current wealth to give you ongoing earnings potential while taking advantage of funds available for your needs or those of your business.

Be aware that should the pledged assets you use for a SBLOC experience a significant decline, you might be required to deposit additional securities and/or cash in the account(s) or pay down the loan. Also note that the securities in your pledged account may be sold to meet the collateral call – even without prior notice.

Most people could use extra cash at some point and would rather not have to liquidate assets to do so. A Securities-Based Line of Credit from a banking institution can give you the flexibility to access cash for personal or business needs without sacrificing your long-term goals. For more information, check with a financial adviser.