What Happens to Your Wealth When Most of it is Tied Up in Your Business

The Hidden Risk in Being “Wealthy on Paper”

A founder or business owner with a stake worth $20 million can have a net worth statement that looks impressive and a day-to-day financial life that doesn't reflect it at all. Most of that $20 million can't be spent, gifted, or drawn on in an emergency. It's locked into a single, illiquid asset: the business itself.

This isn't a flaw in anyone's planning. It's simply the nature of building equity value rather than drawing it out as income along the way. But it does mean the usual assumptions behind a financial plan, that assets can be drawn on, rebalanced or sold down as needed, often don't hold for this kind of wealth. It just doesn't behave like a share portfolio or an investment property, and it needs to be planned for differently.

The risk shows up in predictable ways. Decisions get deferred because there's no cash to act on them. The business ends up carrying financial pressure it shouldn't have to, simply because it's the only accessible source of funds. And the family's entire financial future stays tied to the fortunes of one company.

Why This Makes Ordinary Planning Hard

Most financial planning assumes a degree of flexibility. Take out income protection or life insurance, and that's a regular premium. Help a child with a house deposit, or buy your own home, and that's a lump sum. Build a cash buffer for a bad year, and that assumes the money is there to set aside.

For someone whose wealth is mostly equity, each of these ordinary moments becomes a trade-off. Premiums get paid out of cash flow rather than wealth. Gifting becomes difficult without an asset sale. Estate plans have to grapple with a business that's hard to value, harder to divide, and not something beneficiaries can simply inherit a slice of.

Part of the difficulty is structural. Mainstream lenders are built to assess listed shares and property - assets they can value against established benchmarks and, ultimately, realise through well-developed markets. Private company equity doesn't fit that model. There's no daily market price, no simple way to sell a small parcel, and often no precedent the credit team can point to. Most banks either decline to lend against it at all, or apply such conservative terms that the facility isn't worth pursuing. The asset is real and often valuable, but it doesn't speak the language traditional lending was built around.

None of this is insurmountable. But it does mean these conversations need to happen earlier, and more deliberately, than they would for wealth that sits in more conventional assets.

The Diversification Problem Founders Can't Always Solve

Every advisor knows the line: don't put all your eggs in one basket. It's sound advice, and most clients can act on it by rebalancing a portfolio or trimming a concentrated stock position.

Founders and private shareholders are often structurally unable to follow that advice, not without giving something up. Selling shares in your own company, even a small parcel, can mean a drawn-out process, signalling questions from co-founders and investors, or simply being contractually restricted from doing so until a defined liquidity event. And it means selling before the business has reached its full value, locking in today's price and giving up tomorrow's upside, often at exactly the point the company is starting to gain momentum.

The result is that founders frequently carry far more concentration risk than would be recommended for wealth held in any other form. Not because they don't know it's risky, but because the conventional tools for managing it don't fit the asset.

The Range of Ways People Address The Diversification Problem

Broadly, founders and private shareholders looking to reduce concentration risk without forcing a full exit have three paths available:

• Partial sell-downs or secondaries, selling a portion of the holding while retaining a meaningful stake
• Lending against the asset, using the equity itself as security to access cash without selling
• Timing major decisions around an expected liquidity event, and planning around that timeline

Each suits a different situation, and none is automatically the right answer. Let’s unpack each in more detail.

Partial Sell-Downs or Secondaries

Selling a portion of a shareholding to existing investors, new investors, or through a structured secondary process, while retaining a meaningful stake in the business. This converts some equity to cash without requiring a full exit.

The upside is real cash in hand, no debt to service, and no interest cost. It can also bring a credible new investor onto the cap table. The downside is that it's slower and more involved than it sounds: it typically needs board approval, cap table consent, and sometimes a right of first refusal process with existing investors, all of which can take months. It also crystallises a valuation today, for the portion sold, and may trigger a capital gains tax event. And it permanently reduces the seller's stake and future upside in that portion, with no way to reverse the decision.

Lending Against the Asset

Borrowing against private company shares, using the equity itself as security, isn't a new idea in principle, and it isn't new globally. It's built on the same logic as Lombard lending, used by private banks for centuries: pledge a portfolio of assets as collateral, and access capital without giving up ownership. In more mature markets, this is already common practice. In the US, it's a well-established way for employees and founders at high-value private companies including Canva and Rokt to unlock value in their equity long before any exit.

What's newer is its availability here in Australia.

How it typically works:

• The lender assesses the value of the private shareholding (or other illiquid asset) being offered as security, alongside the borrower's broader balance sheet
• A loan is advanced as a percentage of that value, commonly in the range of 5% to 25% depending on the asset and its volatility, known as the loan-to-value ratio
• The shares remain pledged as security but are not sold. The borrower keeps ownership, voting rights and any future upside
• Funds are typically directed toward an investment opportunity, such as participating in a new funding round or diversifying into a new asset such as an investment property, rather than personal spending
• Facilities can often be structured around the borrower's circumstances, including interest prepayment, or repayment timed to a future income stream or anticipated liquidity event
• If the value of the pledged asset falls materially, the lender may require additional security or partial repayment, similar to a margin call

Who it tends to suit:

Founders with a meaningful stake in a business that isn't ready to sell, employees or long-term shareholders holding equity in a private or pre-IPO company, and investors with concentrated holdings in private shares, property, private market funds or other illiquid assets who want liquidity without disturbing the underlying position.

The trade-off is the cost of debt itself, fees, and the requirement to service or eventually repay the loan, plus the risk that sits with any secured borrowing if the value of the underlying asset moves against the borrower. But for the right person in the right circumstances, it solves a problem that, until recently, had no good solution: accessing real liquidity while keeping full ownership and upside intact.

Timing Around an Expected Liquidity Event

Where an exit, raise, or other liquidity event is realistically on the horizon, some business owners simply plan around it, deferring major financial decisions, or structuring them so they can be revisited once cash is actually available. This works well when the timeline is reasonably clear, but it can leave a long gap if the event is delayed, as it often is, particularly in a slower IPO market.

The right approach, of the three, depends on appetite for dilution versus debt, how close the next liquidity event realistically is, what the cap table and investor base will tolerate, and what's actually being solved for: a once-off investment opportunity, an ongoing income buffer, or a genuine diversification strategy.

A Planning Checklist: Questions to Ask Before an Exit Is on the Table

The biggest mistake we see is leaving this conversation until an exit is imminent, by which point most of the flexible options have narrowed. A few questions worth raising with your advisor well ahead of time:

• What percentage of my total net worth is tied up in this one asset, and am I comfortable with that level of concentration?
• If I needed $500,000 in cash tomorrow, where would it actually come from?
• Have I structured my insurance, estate plan and major financial commitments assuming liquidity I don't actually have?
• What would my board, co-founders or investors say about a partial sell-down or a lending arrangement against my shares, and have I asked them?
• If a liquidity event is realistically 2–3 years away, what decisions am I deferring that I shouldn't be?
• Has my financial plan been built around the specific nature of illiquid wealth, or does it assume my balance sheet behaves like everyone else's?

None of these questions demand an immediate answer. But asking them early gives you options. Asking them late tends to mean choosing from whatever's left.

About Rampart Capital

Rampart Capital is a specialist lender helping founders, executives and investors unlock liquidity from private company shares and other illiquid assets, without selling them. Backed by experienced operators and investors, Rampart structures lending facilities around complex, real-world balance sheets that traditional banks aren't set up to assess.

Disclaimer: This article is intended as general information only and does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of this information in light of your own circumstances and seek professional advice before making any financial decisions.